Amazon has ramped up its financing of merchants - lending them more than $1bn in the last 12 months - as it bids to boost sales on its marketplace and steal business from eBay and other rival online retailers.
In just one year, the company has spent more than two-thirds of what it had previously spent on loans between 2011 and 2015, according to Peeyush Nahar, the vice president for Amazon Marketplace. In that time, the company lent $1.5bn to sellers.
The logic behind lending to merchants is simple - it wants to boost their sales because it takes a cut of transactions on its site. Many small businesses rely on Amazon to simply keep a steady flow of customers; they pay for Amazon to improve their placement in search results, too.
Reuters reports that more than 20,000 small businesses have received a loan from Amazon, with more than half of those taking a second loan from the company. Loans range from $1,000 to $750,000, and interest rates range between six per cent and 14 per cent, according to some sellers - making Amazon a tidy profit.
Currently, the loan programme is on an invitation-only basis, and it is restricted to sellers in the US, UK and Japan. However, Nahar suggested that the company would expand the scheme to other countries where it has marketplaces, including Canada, France and China.
It signals a trend among tech-based companies, which include the likes of payment processing provider Square, and money transfer company PayPal, of lending to businesses, providing new competition to traditional lenders who haven't been as forthcoming with loans for small merchants since the 2008 financial crisis.
The difference between banks and ecommerce companies is that they can use the data they have about them to help them make their lending decisions. "We see the metrics, minute by minute," said Nahar.
"Are they shipping out on time? Is the product what they say it is? How well are they serving customers," he added.
At the same time, Amazon and the other companies extending such finance also enjoy a good return on the funds they lend out.
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