Amazon to ramp up lending in challenge to big banks

Amazon is planning to expand its lending to small businesses in the US, the UK and Japan, in a direct challenge to the big banks which have historically dominated.

The Seattle-based company launched Amazon Lending with little fanfare six years ago, offering select sellers on its platform instant loans for up to 12 months at annual interest rates ranging from about 6 to 17 per cent.

Now, having done about $3bn of originations in total and $1bn within the past year, Amazon is expanding offers to more of the 2m or so businesses on its “marketplace” platform. Such independent sellers — many of which pay Amazon to store, package and ship merchandise to customers on their behalf — account for about half of Amazon’s total units sold worldwide.

Amazon supplies funds from its own balance sheet within 24 hours, then deducts loan payments every two weeks automatically from the seller’s account. If the account runs dry, or if sales suddenly dip, Amazon can put a freeze on any merchandise held in its warehouses until the seller pays up.

It’s a ‘can’t lose’ proposition for Amazon, said Jordan Malik, a Las Vegas-based publisher, noting that the company has a near-perfect view of any seller’s cash flows. It’s a very clever thing they’ve done.

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