Amazon.com Inc. has decided to continue its Amazon Community Lending program, launched a year ago, as a long-term offering to help sellers grow. And it has partnered with downtown-based BSD Capital Inc., which does business as Lendistry, to help support small businesses with short-term loans.
Since its launch, the program has lent more than $35 million and plans to lend more than $150 million over the next three years to US-based Amazon sellers. Loans from Lendistry will range from $10,000 to $250,000, with terms up to five years.
Amazon sellers – who represent more than half of all units sold at Amazon – who are approved for a loan under the program use these funds to grow and to cover other strategic business needs, such as personnel and operating costs, inventory, product development, and manufacturing and marketing efforts to build their brands and grow their customer base.
“Amazon believes businesses of all sizes should have access to financing, payment options and fund management tools,” Tai Koottap, director and general manager of Amazon B2B Payments and Lending, said in a statement. “The Amazon Community Lending Program was developed to help provide sellers in socially and economically challenged communities with working capital as well as one-on-one coaching, educational programs, webinars, and classes to help them grow now and in the future.”
The majority of funds Lendistry has disbursed have gone to traditionally low-to-moderate income communities, minority-owned businesses and other historically disadvantaged business owners. The program also offers small businesses access to Lendistry resources, including one-on-one counseling, webinars, and on-demand educational courses.
When Lendistry was founded in 2015, the black-led company was designed with minority business owners in mind.
“When you look at community loans, it’s not a silver bullet, it’s not a one-size-fits-all. You need to have a multitude of products to help communities access capital,” said Everett Sands, CEO of Lendistry. “We focus primarily on minorities and those who have difficulty accessing capital.”
Lendistry offers small business loans, commercial real estate loans, and government and private program assistance.
“We have a terminal, which businesses typically use to improve cash flow, refinance higher debt…and (revolving) lines of credit that (small businesses) use to make leasehold improvements (or) leasehold improvements,” Sands said. “We have SBA, and that can be used for business acquisition, debt consolidation (and) working capital expansion. Sometimes we have specialty products like Amazon Community Lending, which is
focused specifically on one of our partners and providing access to capital to its constituents.
Sands said Amazon recognizes it has constituents looking to access capital and wants a responsible lender who understands the technology needed to create a streamlined process.
“What we were able to do was work with Amazon, the key technical teams, to collect data in an automated way and pre-approve these small businesses,” Sands explained. “Once these small businesses are pre-approved in their Amazon seller dashboard, they’ll see their pre-approval. They can click a button, and that red button basically takes them to a Lendistry app, and then they can request their loan.
Besides Lendistry, sellers can borrow directly from Amazon Lending or open lines of credit with Marcus by Goldman Sachs.
“But as a seller, you control the debt that you incur, but I think the real key to partnership is that both the seller and Amazon know that this borrower is dealing with a responsible lender. A lender who offers education programs, a lender that also offers different products, and I think that’s really key,” Sands said.
Sands said the success of the program is determined by customer feedback, but more importantly, by risk management.
“Do customers reimburse us? Are we really able to build real repayment capacity? One of the things we wanted to do was with Amazon to launch another iteration of revenue-based financing,” Sand explained. “So with the Amazon product, we’re not taking two years of tax filings or four years of tax filings, which we do with some of our more traditional loans. We actually leverage data from Amazon, like sales or returns and how long they’ve been on the platform. All of these things go into the “repayment capacity” equation.
Sands added that reviewing personal tax returns and financial statements is a good way to determine the right type of loan; however, when dealing with an e-commerce borrower, a lender is more protected by alternatively looking at small business finances.
The lending company derives its income from an initial commission and a “spread”.
“For Lendistry, we charge an assembly fee…up to 3%. It’s an interest rate hiker that we’re just trying to monitor right now. We also make a margin on the loans that we borrow from banking institutions and then lend them out, so the margin is the difference between what we borrow and what we lend,” Sands said. “It also includes what we call the loan loss reserve. We reserve a portion in case borrowers default.
Small businesses persevere
According to Amazon seller Angela Watts, co-founder of San Clemente-based Slyde Handboards, the loan program helped her borrow $29,900 efficiently.
“The great thing about the program is that it only takes the click of a button. Business owners are very busy and…they approve our loan based on our sales and relationship with Amazon, which makes sense. They can see what our historical data already is. They have all this information about our earnings,” Watts said. “A lot of loan programs, it’s on your own credit; you must guarantee personally. (With Lendistry) it was throughout the company. Because of that, I went with them rather than another program.
Watts, whose business sells handboards for bodysurfing, has been an entrepreneur for 12 years and said she believes it is in everyone’s interest that small businesses have access to adequate funding, adding that She thinks government loans like those administered by the SBA are “archaic.” ” and needs to be redesigned to make it easier for borrowers to navigate.
“Amazon and Shopify, they need us to survive,” Watts said. “Hopefully within a year or two SBA will get up to speed in helping small businesses access capital, but until then Amazon, Lendistry and Shopify are the easiest, fastest and least complicated options. .”
Pat Nye, regional director of the Los Angeles Regional Small Business Development Center, a government-funded program that provides counseling services to small businesses, said small business owners still face challenges that have arisen during the pandemic.
“Emergency resources like the (Emergency Disaster Loan), (Paycheck Protection Program), Pandemic Relief Grants have been great and have helped many businesses, but now there is there aren’t as many of those resources anymore and businesses are still struggling,” Nye said. “They’ve gone from shutdown to high interest rates and inflation, so economic conditions in some ways have never really improved or by some measures have gotten worse, but there aren’t as many resources to emergency to try to take care of it.”
Nye pointed out that EIDL loan repayments will begin soon, but many businesses that have had to borrow are unable to repay them.
“I feel like there’s some kind of big hangover about to happen with these people who have been trying to get through the pandemic and now things really haven’t gotten better or even got worse. They are going to have to make some tough decisions,” Nye said.
Another key issue facing small businesses is the tightening labor market. Nye said companies he has worked with are struggling to find and retain employees.
“We have seen a huge increase in the number of customers we serve during the pandemic.
Before the pandemic, just for my region, we saw an average of about 7,000 customers a year. At the height of the pandemic, we were seeing around 15,000,” Nye said.
“The other thing I would say is that we tend to work with a lot of very diverse communities, and the impacts of the pandemic are making that even worse. We’re seeing increases in all different demographic groups. We’ve seen a lot growth in communities that have historically been underrepresented I am very optimistic that some of the changes caused by the pandemic are driving certain activities and our ability to follow and focus on some of these communities that may not have -not be the resources they should have.