LoanBuilder is a good first-stop shop for borrowers looking for short-term loans and who need money quickly. Even though LoanBuilder was acquired by PayPal in late 2017, it's unrelated to PayPal's main service, and you will not need a PayPal account to obtain funding. LoanBuilder provides short-term loans up to $500,000 for periods of less than a year. We recommend LoanBuilder for borrowers seeking quick short-term financing solutions. However, borrowers seeking the lowest-cost option will likely be better off with longer-term loans. LoanBuilder's fees are generally on par with other short-term lenders but have the benefit of being more transparent.
- LoanBuilder A PayPal Service Review: Should You Apply?
- Eligibility Criteria
- Features, Rates and Terms
- Application Process
LoanBuilder, A PayPal Service Review: Should You Apply?
We recommend LoanBuilder for borrowers who need money quickly and desire a transparent lending process. LoanBuilder provides short-term loans up to $500,000. Interest is charged as a fixed percentage upfront and can range from 6.49% – 19.31% of the total loan amount (24.83% - 49.94% APR).
The Pros of LoanBuilder
One of the things about LoanBuilder that stood out is its transparency. Much of the short-term lending market is opaque and it's often difficult to obtain a rate estimate without applying for a loan. Specifically, we found LoanBuilder's Loan Configurator tool to be helpful and informative.
The Loan Configurator is useful for estimating your borrowing costs and takes your credit history into account, which is a cut above the typical sliding scale calculators that we encounter elsewhere. Additionally, borrowers can prequalify for loans without impacting their credit scores, which gives prospective applicants a good sense of where they stand without having to commit to anything.
We also liked that LoanBuilder discloses its fees upfront. Aside from a nominal $20 returned-payment fee, LoanBuilder does not charge any origination fees, closing costs or processing fees. Although the upfront interest charge may be hefty for some, borrowers will know their all-in costs before committing to loans as LoanBuilder doesn't charge hidden fees. This what-you-see-is-what-you-get approach to lending stands in contrast to other lenders who tend to bury their fees within complicated loan agreements.
Finally, another item worth mentioning is that J.D. Power recognized Swift Financial (The company that created LoanBuilder prior to its acquisition by PayPal) for the outstanding customer service performance of its live phone channel, so borrowers applying over the phone should encounter a relatively smooth experience with LoanBuilder.
The Cons of LoanBuilder
Some borrowers may find LoanBuilder's 12-month term limitation to be restrictive. This short time period results in higher repayment costs than other longer-term loans. Additionally, even though LoanBuilder has no prepayment penalty on its loans, there's no economic benefit to paying them off early either. Unlike a traditional amortizing loan structure, LoanBuilder charges the full interest amount upfront.
To illustrate our point, take two similar businesses borrowing the same amount for 52 weeks, who are charged the same amount of interest. If Business A pays off its balance after 26 weeks, while Business B took the full 52 weeks to pay off its balance, both Business A and Business B would pay the same dollar amount. This is because the interest charge is incurred upfront instead of gradually over time, as is common with traditional amortizing loans like mortgages and auto loans. Therefore, accelerated payments will not reduce your interest expense.
Based on the fixed interest fees we were quoted, LoanBuilder's short-term loan product ranks somewhere between a merchant cash advance and a traditional short-term loan in terms of the interest charges incurred, which makes it more expensive than many of the other short-term loan products available on the market. However, due to the nature of LoanBuilder's fee schedule, it is difficult to compare short-term loan products across lenders. You will need to submit some basic details through LoanBuilder's check-eligibility option to obtain a more accurate sense of your borrowing costs. This will not impact your credit score.
While LoanBuilder is available to business applicants in all 50 states, the lender also has a rather long list of industries that it will not serve. The lender discloses the full selection of ineligible businesses on the FAQ segment of its website, which includes entities such as law firms, nonprofits and religious organizations. Many of these businesses are understandably excluded to limit the lender's exposure to risk, but nonetheless, this makes LoanBuilder less accessible than some other lenders.
LoanBuilder demonstrates a level of transparency that's uncommon with other short-term lenders. All of its fees are disclosed upfront and the lender provides a way to estimate borrowing costs without commitment. However, the lender's upfront interest charge and limited loan terms are more expensive than many long-term loan options. The inability to reduce one's interest charge through early principal repayments can also be frustrating and further drives up the cost of its services. At the very least, borrowers seeking short-term loans should consider estimating their borrowing costs through LoanBuilder to obtain an accurate no-commitment baseline for their expenses.
You do not need to have a PayPal account to obtain financing with LoanBuilder. At a minimum, you must meet the qualifications listed below to be eligible for a loan. Meeting these qualifications does not necessarily mean you will be approved for financing.
- Minimum personal credit score: 550
- Minimum annual revenue: $42,000
- Minimum time in business: 9 months
- Located within the 50 states + D.C.
Additionally, LoanBuilder lists a number of industries that are ineligible for financing. If your business falls into any of these categories, you will not be able to apply with LoanBuilder.
Features, Rates and Terms
LoanBuilder's rates are based on a fixed percentage of your total loan amount, which is then paid off over the life of your loan; the quoted rate is essentially a fixed-fee charge. These are different from the standard interest rates and APRs charged on typical loans like mortgages.
Instead, the quoted rates are actually a fixed percentage of your total loan amount. As an example, if you were to be charged a 25% rate on a $100,000 loan, the total repayment amount would be $125,000 (25% x $100,000 = $25,000 and then $25,000 + $100,000 = $125,000). The quoted percentages are not expressed in APRs and should not be confused with such.
The total interest charge will also depend on your desired loan amount, loan term, business credit and personal credit history. Any previous loan experience with LoanBuilder or Swift Financial will also be taken into account.
LoanBuilder's short-term business loans have the following features.
|Loan Amount Range||$5,000 - $500,000|
|Total Interest Percent||6.49% - 19.4% (Fixed upfront interest charge on loan amount)|
|Financing Terms||13 - 52 weeks|
|Collateral Required||UCC-1 filing|
|Personal Guarantee Required||Yes|
LoanBuilder Application Process
LoanBuilder's application can be completed online or over the phone. Borrowers can receive funding in as little as one business day if approved. Depending on your credit background or desired loan amount, LoanBuilder may require a call to complete the loan application. Applications in excess of $250,000 must call (800) 347-LOAN to apply.
Prospective applicants can either estimate their funding costs through the LoanBuilder Configurator or see whether they prequalify through the “Check Eligibility” button on its home page.
We note that the Check Eligibility option conducts a soft inquiry of your credit background, which will not negatively impact your credit score. This enables you to obtain a more accurate estimate of what your eventual borrowing costs might be. In either case, once you're ready to apply for a loan, you will need to proceed through the Check Eligibility option.
We found the LoanBuilder Configurator to be helpful and informative. The tool takes your estimated annual revenue, credit history and available credit, and it returns a sliding scale adjusted for the specifications you provided. Applicants can then adjust this scale based on the amount they wish to borrow and the term they wish to borrow for and see their estimated interest charge, total repayment amount and weekly repayment costs.
None of this requires you to disclose any personal information, which makes it a great way for borrowers to estimate their expenses. Additionally, borrowers who wish to proceed with the application can proceed to the Check Eligibility segment and get prequalified without having to consent to a credit check. We note that LoanBuilder will not do a hard pull on your credit report until you've actually signed its loan agreement.
Once you're ready to apply through the Check Eligibility selection, LoanBuilder will ask you a number of questions to confirm your identity and business. In order to expedite the process, be sure to have the following information ready:
- Legal business name, address and contact information
- Funding code (optional, if you received a mailer)
- Business date of inception and state of incorporation
- Entity type (LLC, corporation, etc.) and industry/subindustry
- Annual revenue
- Number of full-time employees
- Primary loan purpose
- Personal contact information
- Personal citizenship status, date of birth and Social Security number
- Personal percent ownership in business
After you've provided all the requested information, you will need to check the remaining boxes to consent to electronic disclosures and authorize them to obtain electronic information about you and your business. At this point, you should be able to see the cost estimate without any impact to your credit score.
LoanBuilder will not conduct a hard pull on your credit report until you've electronically signed the loan agreement; this is very clearly disclosed at the bottom of the page. At this point, LoanBuilder may also request additional information to verify your identity including bank statements and a driver's license.
Once you've completed your application and provided all requested documentation, LoanBuilder will contact you with a decision within one to two business days, depending on your requested loan amount.