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01/08/2023Amazon to ramp up business loans
11/01/2022Amazon launches new MCA program
09/29/2022Amazon, Lendistry partner on lending
03/04/2022How Square avoided 'death by Amazon'
09/21/2021Amazon, Lendistry partner on SMB loans


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Diving into Amazon's Small Business Lending


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Amazon’s Business Loan Trajectory

January 10, 2023
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AmazonAccording to documents purportedly obtained by Business Insider, Amazon plans to increase its business loan operations in 2023, estimating that loan receivables will eventually exceed $2B. Insider also says that its expected loss rate is 1.34%.

The receivable figure would not be all that surprising as Amazon as been on a steady trajectory upwards over the last decade with the exception of 2020 when covid struck. Its receivables reached $1.4B in Q3 2022. The year-end figure has not yet been released. $2B+ for 2023 would be in line with the historical trend.

2016: $661M
2017: $692M
2018: $710M
2019: $863M
2020: $381M (covid)
2021: $1B
2022 (Q3): $1.4B

Not counted in these figures is financing to Amazon sellers conducted through a third party. Amazon recently teamed up with Parafin on merchant cash advances, Lendistry for Business Loans, and Marcus for lines of credit, for example. Data on funding from these parties is a little more difficult to come by.

How the Amazon / Parafin Merchant Cash Advance Deal Came to Be

November 2, 2022
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Back in December, Parafin, then a fintech startup with 20 employees, submitted a proposal to Amazon to roll out a potential Amazon merchant cash advance product. At the time, Parafin was little known to the general public and its surprise deal with DoorDash wouldn’t even become public until a month later.

AmazonThe prospect of an MCA would not have been foreign to Amazon given that the company already offers direct business loans, lines of credit through Marcus by Goldman Sachs, and other loans thanks to a successful pilot with Lendistry. But the team behind Parafin were virtual unknowns in the merchant cash advance industry itself. The company’s 3 co-founders, including CEO Sahill Poddar, all hail from Robinhood, the investment app that became wildly popular especially with younger adults over the last several years.

Coincidentally, more than a dozen people employed by Parafin, including the co-founders, are former Robinhood employees, according to profiles reviewed on LinkedIn. It’s part of a trend, it appears, as other members of their team hail from well known Silicon Valley firms like Lending Club, Stripe, Funding Circle, Google, Amazon, Facebook, StreetShares, and more.

Ultimately, Parafin’s big bet paid off. On Tuesday, November 1st, Amazon announced that the Parafin team was the one it had chosen to debut its official merchant cash advance product.

“Amazon is committed to providing convenient and flexible access to capital for our sellers, regardless of their size,” said Tai Koottatep, director and general manager, Amazon WW B2B Payments & Lending, in the announcement. “Today’s launch is another milestone in strengthening Amazon’s commitment to sellers, and builds on the strong portfolio of financial solutions we already provide. This latest offering significantly expands sellers’ reach and capabilities, and broadens their access to capital in a flexible way—one that helps them control their cashflow, and by extension, their entire business.”

“We founded Parafin with the mission to grow small businesses, and we’re thrilled that we have the opportunity to do that by providing Amazon sellers with this merchant cash advance option,” said Vineet Goel, co-founder of Parafin. “It’s a privilege to count ourselves among Amazon’s suite of financial solutions, and we look forward to making a difference for Amazon.com sellers looking to expand their business.”

The product is already listed on Amazon’s website and was rolled out to some US businesses immediately. It will be available to hundreds of thousands of additional sellers by early 2023, the company claims.

available products on amazon

Unique to an Amazon MCA is that funding amounts can start as low as $500 and go up to $10 million.

Amazon’s entrance into the merchant cash advance market coincides wih a unique moment in the product’s history as several states are in the midst of imposing strict regulations on their sale.

A Glimpse Into Amazon Lending

October 16, 2022
Article by:

amazonWhen Amazon revealed it had made more than $1 billion in small business loans in 2018, many people were stunned to find out they had become so active as a lender. But other than marketing it to sellers on their own platform, the company has not attempted to draw much attention to it. They have, however, regularly disclosed “seller receivables” which are defined as “amounts due from sellers related to [their] seller lending program.” Assuming the company has consistently kept their loans on balance sheet and kept loan terms steady, one can drawn their own conclusions about the trajectory of its loan program.

Below are the loan receivables as of year-end for each year except for 2022.

2016: $661M
2017: $692M
2018: $710M
2019: $863M
2020: $381M (covid)
2021: $1B
2022 (Q2): $1.3B

Loan receivables dropped significantly during covid and are most recently at their highest level ever, almost double what it had been in 2018.

In addition to its own Amazon Lending product, Amazon is also offering loans through Lendistry and lines of credit through Marcus by Goldman Sachs. The Lendistry relationship, which piloted last year, resulted in $35M being loaned to more than 800 sellers. Because of its success, Lendistry now plans to loan $150M to Amazon sellers over the next 3 years.

The Marcus by Goldman Sachs relationship is notable because it marks Marcus’ first foray into small business lending.

Affirm Continues Surge after Exclusive Amazon Deal

August 30, 2021
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affirm nasdaqIn a move announced Friday that can change the way consumers interact with the largest online retailer, Amazon and Affirm have partnered together to bring flexible payment options to Amazon customers. A leader in the buy-now-pay-later (BNPL) space, Affirm saw share prices soar as high as 40% Monday morning after inking the exclusive agreement.

According to the deal, Affirm plans to offer financing options for purchases greater than $50 for qualified Amazon customers. Buyers are approved, given the cost of financing and the price of their product prior to purchase upfront, and allowed to make payments via installments on those products. Customers who choose to finance through Affirm will not be charged any late or hidden fees.

“By partnering with Amazon we’re bringing the transparency, predictability and affordability that Affirm provides today to the millions of people who shop on Amazon.com in the U.S.,” said Eric Morse, Senior Vice President of Sales at Affirm in a press release. “Offering Affirm’s alternative to credit cards also delivers more of the payment choice and flexibility consumers on Amazon want.”

After an exclusive deal with Walmart in February of 2019, the company is continuing their attempt at a market takeover by striking a deal with Apple’s Canadian market and Shopify in the states — both within the last month. Affirm is quickly beginning to show dividends by putting together some of the largest exclusive flexible payment option deals out there.

With competition heating up in the BNPL industry, Affirm isn’t the only one trying to incorporate exclusive deals with large markets. Square, a company founded by Twitter’s Jack Dorsey recently acquired the Australian firm Afterpay for $29 billion. Paypal has also made their presence known by offering similar services. With a market cap at over $26 billion, Affirm will be in the fight to compete in the flexible payment option space. With competition from companies like Paypal and moguls like Dorsey, Affirm CEO Max Lechvin is in familiar territory. Prior to starting Affirm, Lechvin was a co-founder at Paypal.

With transparency a major component of their business model, Affirm customers may begin to spend more while initially paying less, a move that can provide a better experience for customers— something that seems like a no-brainer for any company selling pricey consumer-based products.

An Amazon Capital Lending Loan

February 2, 2021
Article by:

Amazon’s small business lending business is no small operation. deBanked recently viewed a loan agreement between Amazon Lending and an Amazon seller in which the seller received a loan of $300,000 at an annual interest rate of 15.99%.

amazon lending

In 2019, we estimated that the company had originated $1.5B in small business loans, placing them in the #5 slot on our list, but the company is possibly on track to be #1.

Can Amazon and Goldman Sachs Win With SMB Lending?

March 10, 2020
Article by:

This story appeared in deBanked’s Mar/Apr 2020 magazine issue. To receive copies in print, SUBSCRIBE FREE

amazon and goldman sachsB2B e-commerce dwarfs the value of retail online transactions — by some estimates, those B2B transactions top some $1 trillion per year in the U.S., which compares to about a half billion dollars of revenue for the B2C side. And B2B e-commerce keeps on growing as more companies — especially small- and medium-sized operations — look to online marketplaces and other channels for daily suppliers, and otherwise shift toward fully digital and mobile operations instead of relying on paper invoicing and other analog supply chain processes.

That’s one of the important factors to keep in mind when considering the prospects of Amazon potentially working with Goldman Sachs to offer SMB lending options by adding the investment bank to the Amazon platform. The possibility of such a business offering — pairing up one of the world’s leading retail, delivery and one-button payment operations with the venerable investment bank — was floated early in 2020 and is already casting a shadow across the B2B and lending community. The backing and brand strength of Goldman Sachs could help unleash a new SMB lending force — one that is also fueled by Amazon’s treasure chest of consumer data and Goldman Sachs’ underwriting expertise. But let’s not get ahead of ourselves just yet.

Significant pitfalls come along with the anticipated opportunities. Not only that, but nothing has yet gotten off the ground, at least not officially. Here’s the idea, culled from previous reports and conversations with experts who know the lending space, along with keen observers of retail and Amazon: The e-commerce operator, eager to build a stronger ecosystem around its already robust B2B marketplace and related operations, would team on SMB lending with Goldman Sachs, itself eager to break into new product lines and add some new fat to its margins.

Amazon and Goldman Sachs aren’t saying too much about that idea and did not comment for this story. The rough outlines of the plan appeared in the financial press in February. But it’s no secret that the two companies are indeed looking for new financial products and new consumer segments.

Amazon has built its B2B business into a unit whose growth has recently outpaced its retail side and even its powerhouse Amazon Web Services. As well, Amazon was on track in 2019 to invest some $15 billion in new tools for small- and medium-sized business, according to company documents and officials.

Granted, much of that explosive growth comes about because B2B is relatively new for Amazon, but such growth demonstrates how well Amazon is gaining — and even keeping — new B2B customers. Many of them are attracted to the digital and mobile efficiency of the Amazon platform, to say nothing of the speed of Amazon deliveries as the Seattlebased company continues to pour massive investment into trucks, warehouses, fulfillment robotics and other logistical areas. Just consider this data point: SMB thirdparty sellers tend to make up more than 55 percent of sales in Amazon stores, according to company financial documents.

Loans offered by Amazon and Goldman Sachs would help those Amazon customers fund purchases of supplies without having to seek out another creditor — or leave the Amazon online and mobile ecosystem.

“If the SMB is already using Amazon to sell and distribute their product, it makes sense they would also accept a loan from them,” Julie Stitzel, the vice president, Center for Capital Markets Competitiveness, U.S. Chamber of Commerce, told deBanked. “Amazon is already a trusted partner of their business operations and integrating the financial component is convenient—it saves time because you don’t have to deal with two separate entities.”

The move also would make sense, at least on paper, for Goldman Sachs, Joe Ganzelli, Sr., a Senior Director for Cornerstone Advisors, told deBanked. “They are not in the small business space, and this is a space that, frankly, would be challenging for them to compete in without a partner,” he said. Additionally, this potential SMB lending partnership with Amazon could come as Goldman Sachs executives seek to meet their goals of diversifying their business in 2020 and beyond, according to Ganzelli, previous comments from those executives and other reports. “Small business is such a big driver of our economy,” he said.

Those are among the main opportunities. But just because Goldman Sachs and Amazon are involved doesn’t mean the SMB lending offering would succeed. For instance, both companies have had bouts of recent or high profile failure. Who, for instance, has forgotten the massive stumbles of Goldman Sachs leading up to the 2008 financial crash? And while Amazon has gained ground with fashion and apparel, the company has had a relatively hard slog selling trendy clothes to consumers. Could SMB lending become another pothole for those two companies?

Well, certain obstacles would have to be overcome. For Goldman, the learning curve to gain expertise on SMB lending would be severe, according to Ganzelli — even though all that Amazon customer data that’s already been acquired by the e-commerce giant would certainly help with that education. Still, “anytime you enter a new niche, it’s challenging,” he said. As for Amazon, the main — and perhaps only real downside visible at this point — comes from the commitment that comes with SMB lending. “Amazon will be contractually tied to this arrangement if it’s not a success or does not meet growth objectives,” he said.

All that said, this stands as an appealing time for these two heavyweights of the U.S. economy to see if they can make good money via SMB nonbank lending. “While the majority of small and medium size business lending comes from banks, alternative lending products are an increasingly popular option for SMBs,” said Stitzel. “Allowing you to work with one entity to streamline business operations and mitigate economic volatility in a cost effective way, frees a SMB owner to focus more on building their business and less on administration. Companies like Square and Intuit are already successfully doing this for SMBs using their platforms.”

That’s not the only wind behind the sales of this growing trend of alternative SMB lending, of course. Millennials still might take all kinds of scapegoating heat for various consumer, cultural or economic trends — unfairly or not — but the fact is that those younger people are growing up, and starting to take more responsibility for B2B operations, including supply chain and invoicing tasks. As that happens, millennials are playing a growing force in anchoring more B2B companies to mobile and digital platforms. In general, millennials prefer one-stop shopping with trusted outlets. That would certainly benefit Amazon and Goldman Sachs in any SMB lending offering they launch — as that is now helping such alternative lending offerings as Kabbage and some of the newer PayPal products.

“Millennials are the folks who grew up with the expectation of seamless digital experiences,” Ganzelli said. Those B2B consumers are willing to pay the often “hefty” premiums that come with such experiences, too, he said. “The delivery experience and the speed-to-close just blows banks out of the water.”

Goldman Sachs-Amazon Deal to Offer Small Business Loans in the Works

February 3, 2020
Article by:

Amazon Goldman Sachs Partnership
Tech giant Amazon is reportedly in talks with Goldman Sachs to offer business loans to those small and medium sized merchants operating on its marketplace, according to sources that the FT describes as “two people briefed on the discussions with the online retailer.” One of these sources said that it could launch as soon as March.

The news comes after CEO David Soloman spoke at the bank’s Investor Day recently, explaining that Goldman would be pursuing a “banking-as-a-service” model this year that would see the bank white labeling their products for third parties to use. As well as this, Solomon commented on a shareholders call last week that the bank is seeking to increase revenues from new channels such as consumer banking and wealth management.

One such channel is Goldman’s partnership with Apple last summer that saw the launch of Apple Card, a credit card solely available to Apple’s +100 million users in the US. The card’s launch was lauded by Solomon; and according to Business Insider, cardholders had $736 million in loan balances by the end of September, one month after the card was released to the public.

The Apple and Amazon deals highlight how Wall Street banks are employing and partnering with Big Tech to leverage advantage over fintechs, and ultimately gain access into markets that are historically not domains of the uber rich. Traditionally a bank that catered to elites, Goldman Sachs has been edging its way into consumer and small business banking ever since the launch of Marcus, its personal banking platform.

Amazon has been offering loans to merchants on its platform since 2011, using algorithms to determine which sellers would be best positioned to receive and repay a loan. Having previously partnered with Bank of America to finance such loans, the terms of these were for 12 months or less, with amounts funded ranging from $1,000 to $750,000. According to the FT, Amazon had $863 million in outstanding SMB loans on its balance sheet as of the end of 2019.

The digital nature of Amazon’s marketplace would accommodate Goldman Sachs’ neglect of brick-and-mortars stores, which have historically been a waypoint for small- and medium-sized businesses seeking finance.

LendIt Chairman and Co-founder Peter Renton described Goldman’s progression in the fintech space as “impressive,” noting that the speed at which it has been operating isn’t to be overlooked: “I thought something like this would happen but not in such a short space of time. Apple Card was only six months ago.”

As well as this, Renton was wary of how expansive the deal would be, admitting skepticism of it being a large project for either company. Given how both Amazon and Goldman have shown themselves to be selective in who they provide financing for, this assessment may prove correct.

Amazon Says Browser Extension No Longer Secure, Just After PayPal Acquired It

January 13, 2020
Article by:

Last week Politico reporter Ryan Hutchins noted on Twitter that Amazon has been alerting its website users who had installed Honey that the browser extension is no longer safe. The extension, which searches the web for sales coupons for items in your checkout basket and automatically applies them, was recently acquired by PayPal for $4 billion. The deal was agreed upon in November and completed last week. According to Hutchins, such warnings have been viewed by Amazon customers since just before Christmas.

AmazonHaving been compatible for years without any security warnings from Amazon, critics have now raised the question over whether this was intentionally done to level competition between the two tech giants. Honey makes a profit by charging retailers a percentage of the sales made with the coupons that it finds, and with this now under PayPal’s umbrella, Amazon may no longer be comfortable taking that hit. Especially when its own Amazon Assistant offers a similar experience.

Speaking to The Verge, an Amazon spokesperson said that “Our goal is to warn customers about browser extensions that collect personal shopping data without their knowledge or consent.” A charge against Honey that did not seem to stick for Hutchins, who continued on Twitter with, “That’s how all browser extensions work – including Amazon’s own extension.”

During the summer, a security vulnerability was found in the browser extension only to be quickly patched. Following the coverage of this latest security warning, a Honey spokesperson stated to Wired that “We only use data in ways that directly benefit Honey members – helping people save money and time – and in ways they would expect … Our commitment is clearly spelled out in our privacy and security policy.”

Threads on deBanked


09-04-2019

High Risk MCA for a LOGISTICS COMPANY...
please review the details of a deal i am trying to place below. direct lenders only thanks in advance. i have a deal which has been spinning around...
08-06-2019

MCA Needed for a Logistics Company...
only direct lenders, please. i have a deal in which i need to fund asap. this is a logistics company which does $60k a month. this company has two ban...




Found on DailyFunder:

11-06-2020

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amazon e-commerce account?...
10-29-2020

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amazon they are not getting an abl deal and a lot of factors would not be able to do 100% concentration. they will say the can do it, but will eventually restrict availability due to concentration., , getting a stand alone inventory deal done may be difficult. if the inventory is held at ama...
10-29-2020

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amazon only or do they have other commercial customers? if so, what is the concentration with amazon? if it is above 50%, abl is not likely. a fact...