Amazon Lending partners with Bank of America as the platform navigates a complicated loan program.

What happened

  • Amazon Lending, which provides loans ranging from $1,000 to $750,000 to small businesses that sell on Amazon’s websites, has partnered with Bank of America. However, the program’s growth rate is mostly flat compared to the previous year, hovering just under $700 million in outstanding loans in 2016 and 2017.

Why it matters

  • Capital is one of the biggest constraints for physical goods companies, which need to manufacture products months before they get paid for selling them. This is where Amazon Lending, the under-the-radar financing program founded in 2011, comes in. The relatively low-interest loans that the initiative offers Amazon sellers allows them to buy more inventory to sell on Amazon, which, in turn, means more products for people to buy on the platform, fueling the company’s flywheel.
  • The low-interest loans Lending provides also means that Amazon wants to make money when products are sold, rather than on debt. This is the power of its horizontal business model, which allows it to make little or no money on some programs, while it makes large sums elsewhere.
  • But with little growth last year, Amazon is trying to figure out how to scale a complicated program. The partnership with Bank of America de-risks some aspects of the offering, but there is still plenty to figure out if it wants to open the program to even more of its seller base.