Three Merchant Platforms that Offer Great Financing Programs for Businesses

Three Merchant Platforms that Offer Great Financing Programs for Businesses

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Did you know that Amazon, Square and Paypal offer compelling financing programs for merchants on their platform? These are great financing programs for traditionally non-bankable e-commerce sellers and small retailers. If you are on these platforms for a while and have consistent sales, you probably have gotten an invitation. If you are not on any one of these platforms, it’s yet another reason to use them.

1. Amazon Lending: Amazon’s invitation only working capital is a godsend for Amazon sellers. Amazon periodically sends invites of their merchant loan products to reputable sellers on their platform. The APR are really low: 10.9% for 4 months and 12.9% for 6 months with no fees and origination charge. This rate is super cheap compared to similar working capital products like Kabbage or OnDeck whose APR typically ranges from 30-80%.

If you are an Amazon seller and have great sales records and balances on your account, chances are you will get invited. This is great for inventory purchases before a major shopping season. The only glitch is that you do have to pay back in 4 or 6 monthly installments, which might be before the shopping season actually starts. But this is common for other working capital products.

2. Square Capital: Square Capital behaves just like a merchant cash advance , but without an MCA’s extremely high APR that ranges from 70-250%.

According to TechCrunch, a typical Square Capital advance consists of a 1.1x multiple, 10% of card sales, and results in a payback period of roughly 10 months. Let’s say a merchant takes up a $10,000 advance. With a 1.1x multiple, their pay back amount will be $11,000. If the merchant’s monthly card sales are consistently $11,000, then 10% of each month’s card sales would be $1,100. So to pay back the $11,000 that they owe, it would take the merchant 10 months to pay Square back. Using the Nav MCA APR calculator, the overall APR would be 23.49%.

According to Square Capital’s current home page, they seem to change the pricing to 1.13X amount with 13% revenue share. If we assume a merchant can only borrow one month of revenue, this will give an APR of 34.81%. It’s higher but it’s still at the lower end of a typical short term working capital loan.

Since their launch about a year ago, Square has originated more than $100M of loans. It’s a pretty strong product for merchants who otherwise can only obtain really expensive loans.

3. Paypal Working Capital: Paypal offers a similar product like Square. Merchants who have $20K+ annual sales through Paypal can qualify for the loan. It works exactly the same way as Square capital and the APR is 25% +/- 1% depending on the percentage of revenue share. It’s a really viable product for merchants who accept Paypal as the payment solution. They also emphasize on their website that no personal guarantee is required for the loan.

They let merchants borrow about one month of revenue, which is comparable to Square Capital’s offering. They do ask merchants to pay back at least 10% of the total of the original loan amount + loan fee is due every 90 days, up to 540 days, or until the loan is paid in full, whichever first occurs. This makes total sense in the scenario that the merchants ask their customers to pay through other payment solutions.


Amazon, Square and Paypal are able to offer short term loans to their merchants with really competitive rates because they don’t incur any cost acquiring loan customers, which can be as high as 12% of loan amount from a typical short-term loan lender. They also have detailed/verified revenue and withdrawal records to better assess a merchant’s risk. It’s a win/win solution for both merchants and the platforms. We would love to see more financing programs offered to merchants from other platform.

The only small minus for these financing programs is that typically these loans are not reported to any business or personal credit bureaus so your good payment records won’t show up on the credit reports when you are trying to build up your credit. But on the other hand, they typically also don’t do credit checks, which means no minimum FICO scores are required and no hard inquiries on your report.

Overall, these working capital loans from merchant platforms are among the best funding options for smaller merchants who need working capital to grow their business.

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About the Author — Yun-Fang is a small business advisor who has lived in the SF bay area for 15 years. She is a software engineer and has worked at Yahoo!, Facebook and Soldsie prior to becoming an advisor for Nav. She is passionate about using technology to connect people and to make the world a level playing field.

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