PayPal Introduces Small Businesses to Working Capital


A few weeks ago PayPal introduced its members to a new lending platform called PayPal Working Capital. This loan, or rather “advance” program is specifically designed for small businesses. It is compelling not only because there’s no credit check, but approved borrowers can literally receive the amount they need delivered into their PayPal accounts within a matter of minutes after they apply and are approved.


Before you get too excited about loading up on holiday inventory, keep in mind that at the moment PayPal is only offering this new loan program to about 90,000 business owners who have generally been with PayPal for at least a year and earn between $20,000 to several million dollars in annual sales.

There are some restrictions on the loan amounts as well. Borrowers can only receive up to about 8-percent of their annual revenue. This means that the typical loan one can be approved for is basically being between $1,000 to $20,000.


Since small businesses can have trouble finding resources to get loans through regular channels (such as banks), if the program is successful, it could become a huge benefit to eBay sellers who want to expand the inventory in their stores but haven’t had the capital to do it.


One of the more interesting aspects to the loan program is how you pay it back. Instead of a monthly payment, PayPal just takes a certain percent of your daily sales. This means that if you’re set up on the 10-percent repay program and you have $500 in sales one day, PayPal will take $50, and if you have a $1,000 in sales on another day, PayPal will take $100. And — on days when you have no sales, you don’t pay anything.


PayPal charges a loan fee for this service, rather than traditional interest. The good news is that the faster you pay back the loan, the lower the fee.


In the example illustrated above, if you borrow $8000 and pay it back at 10-percent (which will take longer), your fee will be $947. Borrow the same $8000 and pay it back at 30-percent, however, and your fee is only $281. In this scenario, you would get to keep 90-percent of your sales a day but pay a higher fee, or keep 70-percent of your sales and pay a lower fee. The best part about this is the flexibility. The amount you pay for the loan fee is entirely up to you.


Looks like this might just be a win-win for all!

This guest post was contributed by Kat Simpson. Kat is a trusted eCommerce author, speaker, educator, and entrepreneur. Kat Simpson has been a successful eCommerce merchant for over 10 years; is an eBay Education Specialist and Gold Level PowerSeller, as well as a successful Amazon merchant. Currently Kat is the hosts the popular weekly eCommerce Podcast That Kat Radio and an active Facebook Group ThatKat.






Comments are closed.