If your are Amazon, it is an opportunity. Late in 2011, Amazon quietly began its Amazon Lending program which offers loans to sellers of products on Amazon. Pre-qualified sellers receive letters offering loans with interest rates ranging from 1% to 13.9%, lower than typical credit card charges of 13% to 19%.
Allowing its vendors to buy and therefore sell more inventory on Amazon obviously benefits Amazon through its fees on transactions. But it also establishes a financing profit center at the company. And with its internal knowledge of the sellers’ volume and type of products supplemented by a credit report, Amazon can readily assess the credit-worthiness of its customers.
Amazon is not advertising this program; it selects recipients of offers with maximum amounts and stated interest rates.
Lending standards at banks were clearly too loose for years. Now they have swung too far to the other side. But when banks seek the middle ground, they may find it occupied by competitors like Amazon which moved in to the banks’ traditional business and will not cede the profits back to the banks. The message for competitors is “Watch out!” Some one will move into your traditional business if you neglect it.