Amazon is expanding at a rapid rate its business of providing loans to sellers on its marketplace, using the data it has on sellers to identify those it deems creditworthy. Inc.’s lending business is accelerating, highlighting one more way the online merchant is making money from e-commerce beyond simply selling products in its web store.

The company issued $1 billion in loans in the past year to merchants selling on its marketplace. Amazon launched the lending business in 2011 and uses data from more than 2 million merchants to identify those it deems credit worthy. Transaction processing companies PayPal Holdings Inc. and Square Inc. offer similar credit options using data from their payments businesses, creating new financing options for small merchants that could have trouble securing loans from banks.

Amazon uses algorithms to identify merchants with good selling histories.

Amazon charges merchants a commission on sales. PayPal and Square receive fees for payments. The idea of the lending business is that they will benefit by helping their customers grow. Amazon also charges its merchants for storage in the company’s warehouses and packaging and delivery services.

The Seattle-based e-commerce giant has lent $3 billion to more than 20,000 small businesses in the U.S., U.K. and Japan, the company announced Thursday. PayPal in May announced it has issued more than $3 billion in loans to more than 115,000 businesses globally through its PayPal Working Capital program launched in 2013. Square said it has provided more than $1.5 billion in loans and merchant cash advances since launching in 2014, including $251 million in the first quarter.

Amazon uses algorithms to identify merchants with good selling histories, who are offered loans ranging from $1,000 to $750,000 payable within one year. Those taking loans repay the company through sales made on the site.


Merchants often use the loans to buy more inventory and expand their businesses with new products, said Peeyush Nahar, vice president of several aspects of Amazon’s worldwide marketplace operations, who helps companies sell on Amazon Business as well as overseeing the lending program. Nahar spoke June 8 at the Internet Retail Conference and Exhibition in Chicago. Amazon didn’t disclose interest rates for its loans, but said they are lower than credit cards and cash advances merchants would otherwise use.

“We give them access to capital when others don’t because we get their business model when maybe others don’t,” Nahar said.

During his presentation in Chicago, Nahar also said that, in the first quarter of 2017, 50% of the total units sold on Amazon were from marketplace sellers, up from 30% in the first quarter of 2007. He added that about 100,000 entrepreneurs had more than $100,000 in sales on the Amazon marketplace in 2016.

Among the things Amazon is studying, Nahar says, are ways to leverage the existing delivery capabilities of Amazon marketplace sellers, selling fresh flowers, and offering local-only special deals via the marketplace.


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