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PayPal Business Loans: Are They Worth It?

There are so many different options available these days for small firms that are looking to secure financial support, but not many people may realize that a PayPal business loan could well be a viable option.

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    Financially Reviewed by Gordon Scott

    As the largest online payments platform in the world, it makes sense that PayPal would add a business loan provision to its list of services. It has the capital to back up loans and already has a wealth of information on thousands of businesses via a record of PayPal transactions, making it easy for the platform to assess eligibility. 

    Paypal has created a surprisingly simple small business loan process making it highly competitive with other online specialist lenders. The products are bad-credit friendly and tend to cover short-term and emergency funding gaps. 

    What Is PayPal Business Loans?

    PayPal Business Loans is a program that leverages the company’s reach and specializes in loans it can streamline. The platform offers two types of loans: a standard business option that’s open to all applicants, and a working capital loan, which is only available to holders of a PayPal business account. 

    Both loan types boast a speedy application process that can be completed in about five minutes, and in most cases, funding is with you the next day. You’ll pay a little premium for the convenient service here and rates tend to be a little higher than other competitor platforms. 

    The easiest way to repay your loans is via a percentage of your PayPal sales which makes the process incredibly simple to get to grips with. 


    Advantages and Disadvantages of a PayPal Business Loan

    PayPal Business Loans Advantages

    • Convenience - Working capital loans are undoubtedly a great option if you run a small business that’s reliant on PayPal, with repayments being taken automatically from a percentage of sales
    • No credit checks on working capital - Your eligibility for working capital loans are based entirely on your PayPal sales, meaning those with relatively poor credit don’t need to worry
    • Flexibility - Standard business loans are pretty flexible and allow you to tailor your borrowing amounts and repayments to suit your business needs
    • Fast funding - Whichever type of funding you choose, chances are, you’ll receive the money within 48 hours. In many cases, customers even have their loans the same day
    • Low fees - Unlike other lenders, PayPal waives the majority of fees usually associated with business loans. You won’t pay any admin costs or origination fees and charges for missed payments are low
    • Low revenue requirements - You just need to have $42,000 in annual sales to be eligible for loans - a much lower figure than rival platforms

    PayPal Business Loans Disadvantages

    • A large list of ineligible sectors - While PayPal states that it can provide loans for more than 500 sectors, there’s a large list of ineligible businesses. This includes independent artists and performers, law firms, car dealerships, and management companies. Make sure you check your business is eligible before you apply
    • Startups can’t apply - To apply for PayPal Business Loans funding you need to have been in business for at least nine months. This means startups are excluded
    • Working capital is only available to PayPal customers - If you don’t conduct the majority of your transactions via the PayPal platform, you won’t have access to working capital loans
    • Weekly or daily repayments - It can be a struggle for some businesses to keep up with daily or weekly repayments and you could suffer some serious cash flow issues. It’s worth doing a bit of analysis to be sure you’ll be able to keep up with the costs before you sign up.

     PayPal Business Loan

    PayPal Business Loans Features

    Most applicants will have a PayPal business account and their loan features and terms will largely be determined by a review of their transaction history. However, it’s not compulsory to be an existing customer and applications are open to all. 

    PayPal small business loans are aimed at those looking for short-term lending, and most will see term limits of just 12 months. In addition, you might get some fairly high interest rates, especially if you have a low credit score. 

    On the flip side, the application process is incredibly swift and convenient, borrowing limits are high and eligibility requirements are lenient. 

    Business Loan

    Simply fill in a short 10-minute questionnaire to see if you’re eligible for a PayPal small business loan. This is the most popular option on the platform and anyone can apply. One thing to watch out for, though, is that payments won’t be monthly. You’ll be expected to make repayments on a weekly basis, so make sure you’ve got the cash flow to cover it. 

    In addition, you should keep in mind that interest rates could be quite high, depending on how much you borrow, and how long for.

    Loan Type

    Small Business Loan

    Term length

    1 - 12 months

    Repayment period

    Weekly

    APR range

    12.5% - 125%

    Min - Max amount

    $5,000 - $500,000

    Working Capital Loan

    These loans are only available to PayPal business customers and work a little bit like a merchant cash advance. Users can borrow against 35% of their total annual sales made via PayPal; however, the lending limit is capped at $125,000. You can choose your repayment percentage to be deducted directly from your sales, which ranges between 10% - 30%, and the higher you go, the quicker you’ll repay. 

    Since you get to choose the repayment levels, it can become quite complicated to work out your total interest and term lengths, and it’s recommended you try the PayPal working capital calculator to get an idea of what you’ll pay. This is a pretty nifty tool and it’s great to see such a high level of transparency at PayPal.

    Simply enter your annual sales, and the amount you’d like to borrow, into the calculator and you’ll be given a selection of repayment percentages and fees. Bear in mind this could be different from your final offer though. 

    Loan Type

    Working Capital Loan

    Term length

    1 - 12 months

    Repayment period

    Daily

    APR range

    Only disclosed on the application

    Min - Max amount

    35% of total sales value up to $125,000

    PayPal Business Loans Interest Rates and Fees

    One of the benefits of taking out a loan with PayPal is that you won’t pay much in terms of fees. There are no administration or origination costs, and the only charge you can expect to pay is if PayPal is unable to take payment. Since working capital loans are deducted directly from your PayPal sales, you don’t need to worry about late payment fees either since your costs will always be a percentage of that day’s sales. 

    Small Business Loan

    Loan type

    Small business loan

    Origination fees

    Zero

    Prepayment fees

    Zero

    Late payment fees

    $20 returned payment fee

    Maintenance fees

    Zero 

    Interest rates

    12.5% - 125%

    Working Capital Loan

    Loan type

    Working Capital loan

    Origination fees

    Zero

    Prepayment fees

    Zero

    Late payment fees

    Zero

    Maintenance fees

    Zero 

    Interest rates

    12.5% - 125%

    How to Qualify for a PayPal Business Loan?

    The qualification requirements for PayPal small business loans are surprisingly lenient and acceptance rates are high. Plus, it’s a good option for those with bad credit as both loan types only require a minimum credit score of 550. 

    The only thing to bear in mind is that if you’re applying for a working capital loan, you’ll need to hold a PayPal business account and be taking enough daily sales via the platform to cover your repayments. Standard business loans are open to all applicants. 

    Small Business Loan

    Criteria

    Small business loan

    Minimum credit score

    550+

    Minimum annual revenue

    $42,000

    Minimum time in business

    At least nine months in business

    Working Capital Loan

    Criteria

    Working capital loan

    Minimum credit score

    550+

    Minimum annual revenue

    $42,000

    Minimum time in business

    At least nine months in business

    Additional criteria

    You must hold a PayPal business account

    The PayPal Business Loans Application Process?

    PayPal may just have one of the fastest application processes we’ve seen in the online lending community. You start by filling in a questionnaire that takes no more than five to 10 minutes to complete. You’ll get a near-instant response on your eligibility before moving on to choose your terms and borrowing amount.  

    At this stage, you’ll be able to see how much the loan will cost and be asked to accept or reject the offer. If you click accept, a hard check will be run on your credit record. Once approved, funding will appear in your account within 48 hours. 

    Working capital loans are given using a slightly different process. Since the platform already has all of your business details from your PayPal account, it’s simply a case of verifying your identity and confirming your transaction history. You’ll know instantly whether or not you’ve been approved, and it’s simply a case of choosing your borrowing amount and what percentage of your daily sales will be deducted for the repayments. 

    The documents required to apply can vary between each application. In most cases, PayPal will ask for at least four months of business bank statements, but it’s useful to have the following additional information at hand too:

    • Tax details
    • Business registration information
    • Photographic ID
    • List of business owners
    • Personal financial information

    How Does PayPal Determine the Loan Amount?

    If you use PayPal to process the majority of your daily payments, your daily sales figures will primarily determine how much you can borrow. This is because it gives the platform a very clear idea of how much you’ll be able to repay. For those that don’t process payments via PayPal, you’ll be assessed on your credit score and financial statements of your business.

    Most people have heard of PayPal. This eCommerce giant now employs more than 23,000 people globally and has an estimated net worth of around $45 billion. Its loan business is growing from strength to strength each year and is shaping up to be one of the most secure lenders on the market. 

    Customer Support

    As a long-established and reputable lender, you’ll find an extensive FAQ page to answer any initial queries you might have. PayPal backs this up with a series of useful articles and guides over on its business resources center page. 

    If you want to speak to a service agent or raise a specific query, it can be a little confusing as to where to go at first. All PayPal customer service is integrated, so there’s no specific helpline to talk to a loan advisor. That being said, you can still get in touch over the phone, via live chat and email, and your query will be directed to the relevant department. 

    In addition, you can turn to the customer forum for answers where thousands of topics have been covered by community members. 

    PayPal Business Loan Reviews

    It can be a little difficult to pin down exactly what customers are saying about PayPal small business loans because aggregate review sites like Trustpilot consider the company as a whole, not just loans specifically. PayPal has very low ratings on Trustpilot, however, the overwhelming majority of these reviews don’t relate to its loan services so they can’t be relied on as a good metric. 

    A number of positive reviews can be found on Merchant Maverick where customers have noted they were pleasantly surprised to find low fees, a simple application process, and fast access to funding. In other cases, PayPal has been praised for allowing customers the flexibility to choose their own repayment percentages when opting for working capital loans.

    Where criticism arises, it tends to be focused on slow or unresponsive customer service teams and high interest costs. Additionally, some users have reported an increase in the number of loan rejections recently which may be linked to business performance during the pandemic. 

    Positive Reviews

    Negative Reviews

    Low fees

    Unresponsive customer service

    Fast application process

    High interest rates

    Flexible repayments

    Increase in the number of rejected applications

    Final Thoughts

    PayPal small business loans are an excellent choice for those that need fast access to funding or have poor credit. It operates one of the most streamlined application processes we’ve seen and offers existing PayPal customers an easy way to access funding that’s suitable for their business. 

    In some cases, interest rates might be a little high, but this is typical across the industry for short-term lending, and users are paying for convenience. Just bear in mind that you’ll need to be an existing customer to access working capital loans, and to always check you can afford the repayments.