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Amazon Gets Into Merchant Cash Advance Game

Back in February, we reported DoorDash was set to offer merchant cash advances (here). Not to be outdone, Amazon recently announced it was getting into the merchant cash advance (MCA) market. These developments indicate the MCA business is swiftly moving online. 

Whether lawmakers and regulators will be able to keep pace remains to be seen. Until then, you should contact ReconcileMyMCA.com. We advise businesses struggling under the terms of MCA agreements. Let’s look at Amazon’s new merchant cash advance program and what this means for third-party sellers. 

How Does Amazon’s Merchant Cash Advance Program Work?

In November, Amazon announced it is partnering with fintech startup Parafin to provide merchant cash advances to its sellers. The San Francisco-based company was founded in 2020 by former data scientists and engineers of Robinhood seeking to help small businesses that were left behind during the pandemic. Parafin provides end-to-end financing solutions to e-commerce platform sellers. 

“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, of Amazon WW B2B Payments & Lending, in the announcement.

The MCA program offers advances in capital amounts from as low as $500 to as much as $10 million. Repayment is based on a portion of future sales. Sellers are not required to make minimum payments, pledge collateral, or even pay interest or late fees. 

Because personal guarantees and credit checks are not required for approval, MCAs are advantageous to business loans. According to Amazon’s site, sellers who take MCAs only pay a fixed capital fee.  This fee is not clearly explained, but more about that later.

Who Is Eligible for An Amazon/Parin Merchant Cash Advance?

Amazon’s MCA program is only available to select sellers who have been on the e-commerce site for at least 3 months. The program will be available to more sellers in early 2023, according to Amazon. Minimum sales and valuation requirements are not specified. 

The platform helps Amazon retain sellers while drawing revenue from a share of every advance – third-party sellers account for half of the tech giant’s retail revenue. Expanding to the MCA market comes as no surprise since Amazon already offers direct business loans through Amazon lending and business lines of credit in partnership with Marcus by Goldman Sachs. 

“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,” said Vineet Goel, co-founder of Parafin.