Amazon FBA jumpstart: Financing options and seller tips

Starting an e-commerce business requires some funding to ensure you can sustain the business. However, your cash flow can significantly affect how you scale your business to seven figures or more.

It took me 18 months to scale to seven figures. I was aggressive and used my cash flow in an organized way. I also like to monitor everything, especially the numbers, and play with them.

If you’re just starting an Amazon FBA (Fulfillment by Amazon) business, you need to know your financing options:

1. Amazon Lending 
2. Credit cards
3. SBA loan
4. Traditional line of credit
5. Family and friends

Knowing these financing options provides a potential backup plan if your first funding option falls through. Once you have funding in place, you can focus on growing your FBA.

FBA financing: Amazon Lending

Amazon Lending is a service created by Amazon in 2011 to help small and medium-sized business owners grow on Amazon. This service is only available for Amazon sellers and offers a lower interest rate than credit cards.

I used Amazon Lending so I could pay my credit card debts. The logic behind this is you get a loan with a lower interest rate to pay your debts with a higher interest rate. This will help reduce the number of your monthly payments.

By the way, not all Amazon sellers are eligible for Amazon Lending. Here are the requirements:

• You need to be an active Amazon seller.
• Good standing seller account and good customer metrics. You can’t have any serious customer complaints in the past six months.
• You need at least a total of 10,000 sales in the last 12 months.

If you’re eligible, Amazon will display an invite on your Seller Central Dashboard.

Credit cards, SBA loans & traditional credit

For new business owners, credit cards may be the best option. Depending on their offer, you can take advantage of their promotions like 0% APR for 12 to 15 months. This means that you don’t need to pay interest as long as you meet your minimum payments.

Credit cards are a good way to finance your Amazon inventory. However, if you decide to use credit cards to finance your FBA business, make sure that you manage them carefully, such as knowing their due dates to pay them on time and avoid additional fees.

Another option is a loan from the U.S. Small Business Administration. The SBA offers loans from $500 to $50,000 with payment terms of six months to six years. An SBA loan is a good way to fund inventories and other supplies. Some of the benefits of an SBA loan are business mentoring programs, and there’s no minimum personal credit score level required before you can get a loan.

You can also try a traditional line of credit — a flexible loan from a financial institution or bank. It’s somewhat similar to a credit card where the amount of funds is limited, and you can use it anytime and however way you want to spend it.

Compared to credit cards, a line of credit has lower risk, more flexible repayment schedule, and usually a lower interest rate. But interest rates can vary, making it difficult to know how much it will cost in the end.

Amazon FBA funding from family and friends

Fundraising from your family and friends can be the best choice if you can’t get loan approval from the above options. But if you ask for help from your family and friends, you need to be prepared and devise a plan.

If you want to fundraise $10,000 from family and friends, back it up with a solid business plan. You can explain to them how the cycle works, when you’ll get the money for the product, how often Amazon pays you, your good track record and history, and your product’s selling opportunity.

If they understand the process, you have a better chance of getting a loan from family and friends. They’ll be confident that you’ll be able to repay them.

How to grow your Amazon business: 4 FBA tips

Now that you have an idea of how you can finance your FBA business, the next thing you need to know is how you can grow it. Here are some tips.

1. Have the right mindset

Starting a business is never easy. Even with financing. your Amazon business is more likely to fail if you don’t have the right mindset. It can be scary, but in order to succeed, you need to be confident.

Prepare yourself for the worst. Learn how to deal with disappointments, failures, stress, and pressure in a way that will push you to be better. If you give up on the first failure or disappointment, you won’t last long.

2. Set realistic goals

Setting goals for your FBA business is crucial so that you have something to look forward to. For example, set a realistic monthly earning that you want to achieve. It can be $8,000 or $10,000. Just be sure you can measure it and that it’s realistic. If not, you’ll only be disappointed in the end, which could lead you to give up.

3. Find the right product

The product you sell on Amazon is vital to your success, so you must do proper product research. Some tools can help you with that, such as Jungle Scout and Helium 10.

If you’re new to Amazon selling, it’s best to start with one product and see how shoppers react. As you gain experience and confidence, you can gradually add more products.

4. Learn how to negotiate with suppliers

As much as possible, you want to get the lowest possible price for your products. This way, you can offer a more competitive price and increase your profit margin. Before you talk to a supplier, know the product’s real price so that you can negotiate better.

Also, be respectful when dealing with suppliers and don’t be too aggressive. Make them feel that they need you for their business and not the other way around.

Building a foundation for Amazon FBA success

With the right mindset, right product, and realistic goals, you’ll steer your Amazon business to success. Getting the right financing may take some time, but it’s not as complicated as you might think. I tried a couple before I found the one that suits my needs. So, it’s like trial and error.

Cash flow is essential in any type of business, and you should take it seriously. The more organized and prepared you are with your finances, the higher chance you’ll be successful in any type of business, not just in Amazon FBA.