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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.
