Amazon Wants Their Hands on Everything
Amazon is involved in almost everything – from ecommerce, music & video streaming to grocery delivery. Not many people know but Amazon has also been running a program called Amazon Lending since 2011.
It offers among the best small business loans to approved suppliers who are a part of the Amazon Marketplace so that these sellers can finance inventory needs.
In 2018, Amazon officially partnered with the Bank of America to further expand its imprint in the lending industry. Although new, Amazon has some huge bidders lined up to strike a deal. Recently, one of the biggest names in the financial services industry, Goldman Sachs Group Inc., was part of an advanced round of talks with Amazon.
According to a source within the group, if everything works as planned, this project will go live sometime in March 2020. The negotiations have already started, according to the source, and Goldman Sachs have been working on building software that will integrate with Amazon’s current loan platform.
The idea is to make it easier for sellers to get approved for the best small business loans possible. Though most of the details are under wrap, expect a major technical advancement with this proposed software.
Of late, Goldman Sachs has been working to continually transform its traditional investment banking image by entering more consumer and commercial-focused areas with a diverse portfolio of financial services.
CEO David Solomon had recently demonstrated the group’s vision of becoming a Banking-as-a-Service provider for businesses. Hence, it totally makes sense to sign a deal with Amazon. It wasn’t long ago when they helped Apple Inc. launch a virtual credit card.
On the other hand, Amazon CEO Jeff Bezos, too, has been talking about turning the brand into an infrastructure provider. Hence, a Goldman Sachs deal seems to be in-line with the overall idea.
Amazon’s entry into the small-business lending industry has the potential to change the banking industry, similar to the way they revolutionized retail.
Quite recently, Amazon announced that it had made almost $1 billion in small-business loans within the last 12 months, and a total of over $3 billion since its inception.
If these numbers are true amid the expanding footprint of Amazon in other countries such as France, India, Canada, and China, Goldman Sachs will gain direct access to a potentially enormous existing customer base.
One of the noteworthy characteristics is that the Amazon Lending platform doesn’t check for a credit score. Currently, they work to offer the best small business loans between $1,000 to $750,000. Repayment is handled via fixed monthly installments that are deducted straight from the Amazon Seller account.
With Goldman backing Amazon, things seem to be bright for small and medium-sized businesses, especially when it comes to ease of obtaining financing.
In these latter stages of ten years of economic expansion, a move to start loaning small businesses can increase the risk that Goldman takes on. However, managers, including CFO Stephen Scherr, have stated that this risk can be managed by the bank.
If banks don't adjust their methods of doing business, players in the sector may face the same fate as conventional retailers which simply couldn’t compete with Amazon's price structure, logistics, and convenience.
If Amazon and Goldman Sachs go live in March, everyone in the industry should treat this as a warning call given that Amazon can radically transform small business in a big way.
