PayPal Working Capital Review: Loans for PayPal Merchants

PayPal Working Capital Review: Loans for PayPal Merchants

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We recommend PayPal Working Capital for small businesses that have a PayPal Business or Premier account, and need fast, easy funding.

PayPal Working Capital is good for merchants that have a PayPal business account and are looking for fast, easy funding with no credit check required.

Good for

  • PayPal-based businesses
  • Those looking for fast, simple funding
  • Businesses that don’t want to do a credit check

Bad for

  • Businesses that don’t use PayPal
  • Those wanting to make regular monthly payments
  • Businesses seeking low repayment costs
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PayPal Working Capital has the benefit of being fast and simple: applicants can get funded in a matter of minutes, and the loan they receive has a single flat fee to repay instead of an interest rate. Borrowers agree to pay a percentage of sales revenue to repay the loan, with a set minimum amount that they must deliver every 90 days, instead of a set monthly payment. Because the loans are based on PayPal customers’ account history, PayPal can approve and provide funding very quickly without needing to do a credit check or requiring a personal guarantee or collateral.

Review: Who should apply?

If you are a PayPal merchant looking for a loan, then the PayPal Working Capital loan may be a good option for you. This loan can be easy to obtain and offers fast funding for a PayPal-based business. However, it’s important to note that PayPal's Working Capital’s fees add up to a higher cost of repayment than other lenders, which means that borrowers with decent or good credit who can afford to take slightly longer seeking capital may want to look elsewhere.

Pros

  • Easy and fast funding
  • No credit check
  • Single fixed fee
  • Flexible payments

Cons

  • Higher cost of repayment
  • Repayment with percentage of sales
  • Only available to PayPal merchants
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Pros of PayPal Working Capital loan

PayPal's Working Capital loan is among the easiest to qualify for, assuming you’re a PayPal merchant. The process requires no credit check, application, or review of your non-PayPal financial history. To be eligible, you need to have had a PayPal Business or Premier account for 90 days or more, and to process a certain minimum of annual PayPal sales. Those with a PayPal Premier must process at least $20,000 in annual PayPal sales, while those with a PayPal Business account at least $15,000 in annual PayPal. Because the process doesn’t require an application or financial checks beyond your PayPal revenue, the loans are approved extremely quickly—the website claims that loans can be approved in five minutes, but some loan decisions may take as long as seven days.

Another major advantage of PayPal Working Capital is that it does not require a minimum credit score; in fact, PayPal doesn’t check your credit so applying for the loan won’t affect your credit score. This loan also doesn’t require collateral or a personal guarantee. These conditions are quite rare, as most online lenders set a minimum credit score requirement and some may require collateral as a guaranty. A further difference of PayPal Working Capital from typical loans is that there is no interest rate; the repayment is based on a single fixed fee that borrowers pay back over time via flexible payments based on a percentage of your sales. This arrangement can be seen as an advantage, as it makes the loan simple to understand and provides confidence that you’ll be able to pay what you owe each month.

Cons of PayPal Working Capital loan

While PayPal Working Capital does not have an interest rate like traditional loans, you still repay more than you borrow. The loan differs from many others in that the repayment amount is based on a portion of your sales.

A single fixed fee is added on to the amount you borrow, the amount of which is determined by the amount you borrow, your PayPal’s account history, and the percentage of your sales you’d like to use. You then repay the total amount over time — typically daily — via that percentage for your sales. This arrangement can be a disadvantage, as it means that you can’t anticipate exactly how much you’ll pay every day, week, month, or quarter, and you’re not able to keep all of the extra income during times when your sales are high. Also, a minimum payment of at least 5% or 10% of your total loan amount is due every 90 days, which may be more than you can afford if your sales tank for months on end. The arrangement also means that PayPal Working Capital loans are likely to be more expensive to repay than many traditional loans that come with fixed interest rates.

Another disadvantage of PayPal Working Capital is that this loan product is only available to PayPal merchants, with some specific requirements for account holding and revenue. This cuts off a large swath of small business owners who may be interested in these loans, although switching to a PayPal Business or Premier account could mean you can qualify within 90 days.

Final thoughts

PayPal Working Capital is only available to PayPal merchants with a certain level of revenue, but not every PayPal-based business owner is going to be a good candidate for these loans. Those who will want to check out PayPal Working Capital are those who need capital quickly, want to avoid an aggravating application process or a credit check, and who are interested in a simple, sales-based repayment structure. Those advantages are valuable for the right borrowers, but they do come with a high cost of repayment, so those who have a little more time and patience and don’t mind a credit check may want to look for other options.

Eligibility criteria

PayPal's Working Capital loan is among the easiest to qualify for, assuming you meet some basic requirements. To qualify for a PayPal Working Capital loan, you must meet the following criteria:

  • Minimum personal credit score: None required
  • Minimum annual revenue: $15,000-$20,000 in a PayPal account
  • Minimum time in business: a PayPal Business or Premier account of 90 days or more

Applicants need either a three-month-old PayPal Business account with $15,000 in annual sales or a three-month-old Premier PayPal account with $20,000 in sales. If either of these is true for you, there’s nothing else specific you need to do to qualify. PayPal does not require a minimum credit score and does not even check your credit. Getting one of these loans also doesn’t require collateral or a personal guarantee.

Features, rates and terms

PayPal Working Capital has some features that differ from typical term loans. Specifically, the amount you can take out and your repayment terms depend on your revenue over at least three months as reflected in your PayPal business account. The loan does not have a set or variable interest rate or a set term as most loans do. Instead, PayPal applies a flat fee on top of your loan amount that you have to repay along with the loan, and you keep paying until you’ve repaid the total amount. How much that fee will be depends on factors including your loan amount, annual revenue and repayment percentage.

The repayment percentage is the amount of your sales revenue that you opt to have deducted from your account to repay your total loan, including the fee. PayPal deducts this percentage every day you have sales, and while they won’t deduct on any day you don’t have sales, you’re still on the hook for a minimum amount every 90 days. Since your sales can vary day by day, you’ll be paying back a different amount every day. This arrangement is also different from typical term loans, which assign a set amount for you to repay every month. This repayment method can be a drawback, since you won’t be able to predict your payment amount from day to day, and the repayment percentage can end up eating up a large amount of much-needed revenue if your sales are low.

Application process

Applying for a PayPal Working Capital loan is extremely easy. Follow these steps:

  • Sign into your PayPal account and navigate to the Working Capital section, or apply on PayPal’s website.
  • Choose your loan amount.
  • Choose what percentage of your sales revenue will go to repay the loan.
  • Wait to see if you’re approved.

If you are approved, you may receive the loan amount in your PayPal account in as short as a few minutes. Once you start repayment, you’ll keep paying until you’ve paid your balance in full. You’ll have a minimum payment that’s required every 90 days, and you can make manual payments to pay it down faster. There is no early repayment fee.

How does PayPal Working Capital compare with other lenders?

While PayPal Working Capital offers fast and easy funding for PayPal-based businesses, there are many other options out there. Let’s take a look at some other possibilities to consider.

PayPal vs. Kabbage

There are a number of key differences between PayPal and Kabbage business funding: PayPal offers loans, while Kabbage offers lines of credit; PayPal only lends to PayPal business customers, while Kabbage, though owned by American Express, doesn’t target customers of a specific institution and PayPal does not check your credit while Kabbage does. PayPal is a faster and easier option to pursue if you’re a PayPal business customer, though Kabbage is a better choice if you want a monthly repayment schedule or a line of credit.

PayPal vs. OnDeck

OnDeck offers lines of credit with a 12-month repayment term and term loans with 24-month repayment terms. OnDeck funding is more difficult to qualify for than PayPal funding. OnDeck requires applicants to have been in business for 12 months and to have a personal FICO score of 600 and $100,000 in annual business revenue. In contrast, PayPal requires applicants to have only $15,000-$20,000 in annual revenue. While OnDeck funding is fast — with some borrowers getting same-day funding — its time to funding may be somewhat slower than PayPal Working Capital funding. It also is costly, with interest rates starting at 35%. PayPal Working Capital is a better choice for PayPal business customers that have relatively low annual revenue.

PayPal vs. Credibly

Credibly offers a range of business funding options up to $400,000, including working capital loans, merchant cash advances and business lines of credit, all aimed at borrowers with less-than-perfect credit. Borrowers can get approved quickly, often on the same day as applying, but it may not be as quickly as PayPal borrowers can. As with PayPal Working Capital, applying for a Credibly loan will not affect your credit. Borrowers must have been in business for six months or more, have a credit score of over 500, and an average of $180,000+ in annual revenue. This means that to apply for a Credibly loan you must have far more revenue from your business than applicants to PayPal Working Capital.

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