It's no secret that getting small business loan is difficult these days as always, which has led entrepreneurs to turn to other sources for the funding needed to start or grow their businesses. At times it really is true that "It takes money to make money", and when a company's ability to grow and flourish hinges on whether or not they can expand their inventory, the amount of people working for them or even their workspace, an influx of cash is often one of the only things that will make that growth happen. So what if a bank loan, family money or a crowdfunding campaign isn't what you're looking for? Get ready for this...
There's a new loan in town, it can process you and get you funding in mere minutes, and it comes from a company many are already using at work on a regular basis. That's right, friend of many an entrepreneur PayPal recently introduced their PayPal Working Capital business loan, and when we saw mention of it (while doing our own Tin Shingle work on PayPal) our curiousity was piqued. What makes one a good candidate for this specific loan? How does the process work? How many businesses are they going to loan to? Why did they decide to do it in the first place? Instead of wondering in silence, we went straight to the source and asked PayPal themselves. Read on and wonder no longer!
What led to the creation of the PayPal Working Capital loan – what were the catalysts?
Credit conditions in the small business market continue to remain tight even though commercial banks began easing lending conditions in mid-2010. PayPal’s smaller, online-focused businesses have often found traditional lending out of reach. In August, according to a report by The Federal Reserve Bank of Cleveland, the total value of small business loans in the fourth quarter of 2012 was 78 percent less than in the second quarter in 2007.
PayPal aims to help fuel small business growth by introducing PayPal Working Capital. For instance, PayPal merchants will have access to the funds they need to grow inventory and increase their staffs to gear up for busy times such as the upcoming holiday season.
How would you describe an idea PayPal Working Capital loan candidate?
We are in the very early stages of launching the product and are in a limited release phase. Only 90,000 select PayPal businesses will be eligible to apply for the business loan. These businesses process sales through PayPal and require capital to grow their business.
Your PayPal Working Capital lending system states that businesses can actually get loans in minutes – tell us about this process a little bit more and what they need to have to make that happen?
The PayPal Working Capital business loan is based on a business’s PayPal sales history, so funding takes just minutes. Select PayPal merchants just need to confirm their PayPal business account information to apply online, and if approved by the lender select their terms (repayment percentage, loan size, etc.), and then accept their contract. The business loan is then transferred to their PayPal account automatically.
Can a business pay back their loan in ways other than a portion of PayPal sales?
Repayment is based on a percentage of PayPal sales but a loan can be paid in full at any time. The terms of repayment will stay the same, and the fixed fee won’t change. Businesses are welcome to pay the balance in full or in part at any time without penalty.
What are the actual parameters of the loan in terms of how long a client actually has to pay back their loans?
Unlike traditional bank loans, credit cards, and other options that require a monthly minimum payment, the PayPal Working Capital business loan does not have monthly due and does not charge periodic interest. PayPal Working Capital allows a merchant to repay the loan with a share of their sales—this means a merchant pays when they get paid. The loan is available for one affordable, fixed fee that a business chooses before completing sign up. There are no additional fees or hidden charges.
Until the loan balance is paid in full, a portion of sales processed by PayPal is automatically collected from the PayPal account. If a business has a period with no sales, nothing happens, as long as they do not intentionally direct payment volume away from PayPal and keep enough in their PayPal account to pay the agreed-upon percentage owed each day.
How long must you have been active in PayPal to take part in the Pay Pal Working Capital loan.
Loans are not necessarily based on length of time using PayPal, but on previous sales history, transaction volume, and other criteria.
What are the current loan maximums and minimums?
The maximum loan amount is typically 8% of a business’s annual PayPal sales.
Find out more and watch a video here! What do you think about PayPal going the loan-route? Leave your thoughts in the comments below!