Amazon Lending is “on to a winner”

Last week, online giant Amazon announced it would be launching a lending platform for UK-based marketplace sellers…

Following feedback by sellers which highlighted a lack of funding was hindering growth for SMEs, Amazon Lending was launched to help solve this challenge.

It will allow UK sellers to apply for loans ranging from £1,000 to hundreds of thousands of pounds with interest rates of 5.9% and an arrangement fee of 1%. 

The news has been met with mixed reviews from current lenders who help fund small to medium-sized enterprises. 

Marc Goldberg, Commercial Director of Blemain Group, said the lender was always keen to welcome competition to the wider lending marketplace. 

“Our consistently strong growth over recent years is a clear indication of the scale of opportunities within the SME lending sector and it’s no surprise that other companies are eyeing the market,” said Marc. 

“As a specialist lender, we work with many small businesses which have specific needs that mainstream lenders may not always cater for.”

“Clearly, we’re in a different market to the one Amazon Lending aims to attract, although we are both servicing a genuine, underserved customer need.”

Keith Aldridge, Managing Director of SME lender Amicus, welcomed the arrival of Amazon saying they had recently published the findings of a study which showed almost half of SMEs considered using alternative funding. 

“With the decline in support from mainstream funders, the business finance landscape has changed for good and demand for alternative finance is set to go from strength [to strength] over the coming years,” said Keith. 

“The entry of a respected retail name like Amazon into the sector can only improve confidence amongst SMEs and the growth in competition can only be good for the economy as a whole and the sector in particular.”

Meanwhile, Ashley Ilsen of Regentsmead questioned how many SMEs would Amazon Lending be able to help. 

“Amazon Lending will be useful for those with trading businesses who have had a decent track record with Amazon, however, overall it will probably be beneficial to quite a low percentage of SMEs,” said Ashley. 

“This would be the same pool that would have reasonable access to funding through portals such as P2P lenders. 

“Certainly of no use to any developers out there!”

However, Bob Sturges, Head of Communications at Omni Capital, said Amazon was on to a winner.

"It might be red hot at selling everything from DVDs to DIY, but what does the 'Walmart of the Web' know about lending? Well, probably quite a lot,” said Bob.  

“Knowing your customer is an essential part of the credit risk process, and Amazon has data on its marketplace sellers - its intended borrowers - by the bucketload; and given that its loans will be offered on a by-invitation-only basis and repayments deducted at source from the sale proceeds, Amazon looks to be on to a winner.”

Bob felt that SMEs and entrepreneurs in the UK continued to be poorly served by banks and traditional lenders but was worried about the source of new funding.

“A new generation of insurgent lender is helping fill the void should not, of itself, be of concern,” added Bob.  

“However, and as someone who has witnessed the credit cycle over several decades, I automatically worry when I see the Americans getting involved in the British market. It usually presages a slip in our fortunes."