Amazon.com Inc. Amazon has decided to continue its community loan program, which was launched a year ago as a long-term offering for sellers to grow. And it partnered with downtown BSD Capital Inc., which operates as Lendistry, to help small businesses with short-term loans.
The program has provided more than $35 million in loans since its inception and plans to provide more than $150 million in loans to US-based Amazon sellers over the next three years. Loans offered by Lendistry range from $10,000 to $250,000 with terms of up to five years.
Amazon sellers – who account for more than half of the units sold on Amazon – are approved for loans under the program and use these funds to grow and cover other strategic business needs, such as staffing and operational costs, inventory, product development, and manufacturing and marketing efforts to build their brands and grow their customer base.
“Amazon believes that businesses of all sizes should have access to financing, payment options and money management tools,” Amazon’s B2B Payments and Lending Director and General Manager Ty Kotatep said in a statement. Working capital as well as one-on-one training, educational programs, webinars and classes to help them grow now and in the future.”
Most of the money Lendistry distributes typically goes to low- to moderate-income communities, minority businesses, and other historically disadvantaged business owners. The program offers small businesses resources from Lendistry, including one-on-one consulting, webinars and on-demand educational classes.
Strategic lending
Lendistry Founded in 2015, the black-led company was designed with minority business owners in mind.
“When you think about community lending, it’s not a silver bullet, it’s not one-size-fits-all. You have to have more products to help communities get capital,” said Everett Sands, CEO of Ladystory. “We mainly focus on minorities and those who struggle with access to capital.”
Lendistry offers small business loans, commercial real estate loans and assistance with government and private programs.
“We generally have a terminal that businesses are using to improve cash flow, improve senior debt … and (revolving) lines of credit (small businesses) are using to do leasehold improvements (or) tenant improvements,” Sands said. “We have the SBA, and that can be used for business acquisitions, debt consolidation (and) extending working capital. Sometimes we have special products like Amazon Community Lending, which means
It focuses specifically on one of our partners and provides access to capital for their people.
Sands said Amazon recognizes that there are parties looking to access capital, and that it is looking for a responsible lender that can provide the technology needed to create a streamlined process.
“What we’ve been able to do is work with Amazon, the key technology groups, to collect data in an automated fashion and pre-approve those small businesses,” Sands explained. “Once those small businesses are pre-approved in the Amazon seller dashboard, they’ll see their pre-approval. They can click a button, and that red button will take them to the Lendistry app and then they can apply for a loan.
In addition to Lendistry, sellers can borrow directly from Amazon Lending or open lines of credit with Marcus at Goldman Sachs.
But as a seller you can control the debt you take, but I think the key to the partnership is that both the seller and Amazon know that this borrower is dealing with a responsible lender. A lender that offers educational programs, a lender that has a variety of products, and I think that’s really key,” Sands said.
Sands said the success of the program depends on customer feedback, but above all, risk management.
“Are the customers paying us back? Have we really been able to build the ability to pay? One of the things we wanted to do with Amazon is to start another recurring financing based on revenue,” Sand explained. We’re not taking it. We’re actually using data from Amazon, like sales or returns and how long they’ve been on the platform. All of these things are going into the ‘ability to pay’ equation.
Sands adds that looking at tax returns and personal financial statements is a good way to determine the right type of loan; But when it comes to the e-commerce borrower, the lender is more protected by evaluating the small business financing options.
The lending company earns its income from the initial payment and “spreads”.
“For Ledistry, we charge an origination fee… up to 3% because of the rising interest rates we are trying to keep up with now. We also make a spread on the loans we borrow from banking institutions and then we lend them out, so the spread is the difference between what we borrow and what we borrow,” Sands said. “That includes what we call loan-loss reserves. We set aside a portion of that in case borrowers default.
Small businesses persevere
According to Amazon seller Angela Watts, founder of San Clemente-based SlideHandboard, the loan program helped her successfully borrow $29,900.
“What’s great about the program is that it’s just a click of a button. Business owners are very busy and … they approve our loan based on our sales and relationship history with Amazon, which makes sense. You can see what our historical data is already. They have all the information,” Watts said. “A lot of loan programs, it goes on your own loan; You must personally guarantee. (with Lendistry) It was all in the business. For this reason I went with them as opposed to another program.
Watts, whose company sells handboards to body surfing, has been an entrepreneur for 12 years, and said she believes that adequate financing for small businesses benefits everyone, adding that she thinks all government loans administered by the SBA are “ancient.” ” and borrowers need an update so they can navigate more easily.
“Amazon and Shopify, they want us to survive,” Watts said. “In the next year or two, the SBA will step up with the times to help small businesses access capital, but in the meantime, Amazon, Lendistry and Shopify are the easiest, fastest options and least hassles.”
Pat Nye, regional director of the Los Angeles Regional Small Business Development Center, a state-funded consulting service for small businesses, said small business owners are still grappling with the effects of the pandemic.
“The relief aid that was done during the pandemic, like the emergency resources[emergency damage loan](payment protection program), was great and helped a lot of businesses, but now those resources and businesses are not so much. He’s still struggling,” Nye said. “They’ve had high interest rates and inflation since the shutdown, so economic conditions haven’t really improved in some ways or gotten worse by some measures, but there’s not a lot of emergency resources to try to take care of that. “
Nye pointed out that the payment of loans to IDL will start soon, but he pointed out that many businesses that had to borrow are not in a situation where they cannot pay back.
“I feel like there’s going to be a huge hangover with people who have tried to deal with the epidemic and now things are not really getting better or even worse. They have to make tough decisions,” Nye said.
Another key issue small businesses face is the tight labor market. Nye said the companies he has worked with are struggling to find and retain workers.
“During the pandemic, we have seen a significant increase in the number of customers we serve.
Before the outbreak, for my region alone, we averaged about 7,000 customers each year. At the peak of the outbreak, we were seeing about 15,000 people,” Nye said.
The other thing I would say is that we tend to work with very diverse communities, and the effects of the pandemic are amplifying that. We are seeing an increase in various demographics. We’ve seen a lot of progress in historically underrepresented communities. I’m very hopeful that some of the changes from the pandemic will drive some activity and our ability to monitor and focus on communities that maybe don’t have the resources they should have.
