PayPal Offers Small Business Merchants Flat Fee Loans

Kim Mays
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Pioneer of online financial transactions, PayPal, has enhanced its offerings to SMBs in the past year to include its mobile payment system, PayPal Here, in the U.S. and UK. It is also allowing its customers to pay at the register at millions of merchants via its partnership with Discover, and its new PayPal Beacon promises to revolutionize shopping by allowing its customers to pay for goods at participating stores virtually hands-free.

The company that has helped many small businesses get online shopping off the ground with its simple payment system is now offering small business loans. Unlike some types of business financing, PayPal says its PayPal Working Capital loans are easy to comprehend and relatively inexpensive.

Aimed at small business merchants, the loans charge only a flat fee. Its customers “can borrow up to 8 percent of their annual PayPal revenue, up to $20,000.” And repayment of the loan is handled through the extraction of 10 to 30 percent of the business’ daily PayPal sales by PayPal.

According to a Bloomberg Businessweek article, Darrell Esch, a PayPal executive, says that the company’s confidence in its ability to assess borrowers allows it to provide such a low loan rate to its merchants:

‘We’re involved in the cash flow of these merchants. Our experience with the sellers gives us a great vantage point to make solid decisions [on loan acceptance].’

The loans also won’t involve credit checks, so a merchant’s credit rating won’t be negatively affected.  Also, PayPal says that loans can be approved in as few as five minutes.

 Esch has said that up to 90,000 of its merchants will be eligible for the loans, which is actually a tiny percentage of PayPal’s 132 million active online accounts.

Add Comment      Leave a comment on this blog post
Oct 8, 2013 4:27 PM PhilipCohen PhilipCohen  says:
Ah, PayPal ... Whatever; the ugly reality of eBay Inc.: eBay's crooked auctions marketplace ... The clunky "PreyPal" ... The ongoing joke of it all ... Quotes from the eBay executive suite ... Reply
Oct 9, 2013 10:57 AM Terry Robinson Terry Robinson  says:
Paypal is not a good choice for small business capital. What this article does not say is the cost of credit. Look into that and then tread very carefully. There are much better small business lending alternatives today. At Sunovis Financial they are helping thousand of business owners getting terms that make sense. Reply
Oct 21, 2013 11:51 AM Khan Khan  says:
I don't what to make of this news. At first the idea of PayPal doing small business loans sounds greats but like most people have said, people need to thoroughly do more research before they get involved with them. Reply
Nov 18, 2013 10:23 PM sophia walker sophia walker  says:
Paypal is dependable, convenient and so far so good. Adding loan options and partnering with another company seems sketchy. I would not make loans on the go. I would make sure I have read all the fine print. Reply

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