Amazon Lending, founded in 2012, now plans to offer short term working capital loans in other countries where it operates a third-party, seller-run market place business, the head of Amazon Marketplace, Peter Faricy, told Reuters.
The countries are Canada, China, France, Germany, India, Italy, Spain and the UK.
The service is on an invite-only basis and is not open to all sellers on Amazon’s platform.
Other large retailers including eBay’s PayPal and Alibaba Group Holdings, which run third-party marketplaces, are also turning to credit to boost their vendor base.
Some lending industry officials who help lenders assess credit risk say these retailers are tak ing on risky loans because they don’t know the shape of the cred it market in which the sellers are operating.
Small businesses have high fail ure rates, especially in China and India, added William Black, a former US banking regulator and professor of Economics and Law at the University of Missouri.
Amazon said it can safely offer loans based on internal data and because it takes loan payments out of the sales proceeds it pays sellers.
PayPal spokesman Josh Criscoe said eBay merchants who use PayPal are eligible for the working capital loans and credit is offered to only those customers that have a strong PayPal sales history . PayPal has provided more than $500 million in capital since September 2013, with an average loan disburse ment of $2 million per day .
A spokeswoman for Alibaba’s financial services arm Ant Financial, which offers these loans, said credit is offered to Taobao, Tmall merchants and other small business owners who meet certain conditions.
The company also offers such loans to customers in some countries like the United States and Britain.
Amazon offers threeto six month loans of $1,000 to $600,000 to help merchants buy invento ry . It makes money on interest and takes a cut of all sales on its marketplace, which now ac count for about 40% of total Amazon site sales.
Amazon said it has offered hundreds of millions of dollars in loans since 2012, with more than half of its sellers opting for Bloomberg a repeat loan. The company de clined to provide specific fig ures and also did not say how much it plans to lend this year. “Amazon has very little share in China and they haven’t been able to break out of that, so this is a very important necessary step for them to be able to grow,“ said Gil Luria, analyst with Wedbush Securities in Los Angeles.
In other countries including India, where there is a scramble to expand the online shopping market, small business loans could offer a distinct competitive advantage, Luria said.
Online lending accounts for about 3% of the roughly $1 trillion of outstanding personal and small business loans in the US.
The default rate for small businesses with credit under a $1 million stood at 1% in 2014 but is seen rising to 1.6% in 2015, as new lenders with varying ability to assess risk in crease lending, according to small business credit ratings provider PayNet.
Retailers like Amazon do not have data from sellers about some markets in which they operate, and relying on internal seller company data is not enough, said William Phelan, president of PayNet.
Amazon said it has the information it requires to make “great loan decisions“ because of close relationships with sellers and that it mitigates risk by taking loan payments from proceeds due to sellers for their sales.
Sellers interviewed by Reuters and writing on Amazon forums cited interest rates on Amazon loans ranging from 6% to 14%, in line with loans from banks and business credit cards.
Stephan Aarstol, chief executive of Tower Paddle Boards, an Amazon seller, said he has taken four loans from the company starting in March 2014 because of the speed and simplicity of the process. It took him five days to get his first loan. “The problem for a small business owner is not the interest rate, it’s the availability of credit … I can’t grow fast enough,“ he said.