PayPal Business Loans Review
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Pros and cons of PayPal business loans
Pros
- Automated payments
- Very fast funding times
- Quick and easy application
- No credit check for certain loans
- Loans require a personal guarantee
- Low annual revenue and time-in-business requirements
Cons
- Weekly or per-sale payments
- Doesn’t build business credit
- Must commit to using PayPal during repayment
- Must have a PayPal Business account
- Not available in Nevada, North Dakota, South Dakota and some U.S. territories
- Financing cost not disclosed until you apply
PayPal business loans review
PayPal isn’t in the business of small business lending per se (it actually partners with WebBank to fund its loans), but it is in a unique position to see your business’s daily cash flow — or at least the portion that you route through the payment processor. If you accept a lot of customer payments through PayPal, you may be in a strong position to get one of two unique loans with minimum hassle and no credit check.
PayPal working capital loans are repaid with a percentage of each sale you make through the platform until the loan is repaid. If you’re in the market for a more traditional-style funding option, PayPal’s business loans are repaid with regular weekly payments straight from your bank account. In both cases, you’ll pay one flat-rate fee (tacked onto your loan balance) in lieu of interest. PayPal doesn’t offer any hint of how much that fee will be without applying first, so it could be affordable or very expensive.
- You already accept payments through PayPal. You’ll need to process at least $15,000 or $20,000 in annual sales (depending on the type of account you have) through a PayPal account that’s been open for at least three months in order to be eligible for financing with a working capital loan.
- You’re looking for quick funding. PayPal will show you if you’re eligible for funding, and if so, there’s limited documentation and preparation you need to do to apply. If approved, you’ll see the funding available in your account within minutes.
- You’re looking for flexible repayment. You’ll need to make a minimum payment of 5% or 10% (depending on the loan terms) every three months — but aside from that, your payment amount will scale according to your sales volume. PayPal will automatically deduct payments, too.
PayPal business loan financing at a glance
| Product | Loan amounts | Repayment term | Estimated APR range | Fees |
|---|---|---|---|---|
| Working Capital Loan | $1,000 to $200,000 ($300,000 for repeat borrowers) | Varies depending on your sales volume | Not disclosed | One-time fixed fee |
| Small Business Loan | $5,000 to $100,000 ($150,000 for repeat borrowers) | 17 to 52 weeks | Not disclosed | One-time fixed fee |
Term loans
A PayPal business loan works much like other short-term business loans, with a few minor differences. Once you apply, you’ll see the funds show up in your PayPal Business account by the next business day if you’re approved before 5 p.m. EST. Your payments, on the other hand, will automatically come out of your business bank account each week instead of on a monthly basis, like most other loans.
It’s important to know that PayPal doesn’t charge traditional interest on any of its financing products; rather, you’ll pay a fixed funding fee that’s added to your loan balance at the start of repayment. You can pay off your business loan at any time, but because you aren’t being charged regular interest, you won’t actually gain any savings on financing costs. You’ll just be free of the debt sooner, which is still useful.
Working capital loan
If you need a bit more flexibility in repaying the debt, PayPal’s working capital loan might be better. You’ll have access to a wider range of capital compared to a PayPal business loan, and if approved, you’ll see the funds available in your PayPal Business account “within minutes,” according to the company.
Repaying PayPal’s working capital loan is where things start to differ more. PayPal will take a cut of each payment you receive into your account based on a percentage you chose when you applied. Higher percentage payments mean you’ll pay off your debt faster. If you make no sales, you won’t have to make any payments aside from a minimum payment amount ranging from 5% to 10% of your loan amount, due every 90 days.
PayPal business loan borrower requirements
| Minimum annual revenue |
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| Minimum time in business |
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| Minimum credit score | N/A |
One of the defining features of PayPal loans is that businesses that wouldn’t normally qualify for financing may be able to get an easy “in” with one of its two business loans.
Any business that’s been using PayPal for at least 90 days and has generated $15,000 in sales for the year is eligible for funding via a working capital loan. Even its term loan requirements are relatively easy to meet. Businesses with at least $33,300 in sales and a mere nine months in business may qualify, whereas most other lenders typically require two years before you can even apply.
Alternatives to PayPal business loans
| PayPal Business Loans | American Express Business Line of Credit | iBusiness Funding | |
|---|---|---|---|
| Minimum credit score | N/A | 660 | 640 |
| Loan products offered |
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| Time to funding | Minutes | Instant or 1 to 3 business days |
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| Starting rate | N/A | 3.00% to 27.00%
3% to 9% for 6-month terms 6% to 18% for 12-month terms 9% to 27% for 18-month terms 12% to 18% for 24-month terms Each draw counts as a separate installment loan. Single-repayment loans will have different rates and terms. | 22.45% APR |
| Maximum loan size | $300,000 | $250,000 |
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| Minimum annual revenue | $15,000 | $36,000 | $50,000 |
PayPal Business Loans vs. American Express
American Express business lines of credit offer some of the lowest interest rates we’ve seen. But it’s a bit of an unusual product — each draw (i.e., withdrawal of funds from your total available credit) results in a new installment or single-repayment loan. You’ll be able to choose your terms with each draw, at which point you’ll see what interest rate and repayment terms you qualify for.
If you have good or excellent credit and can qualify for American Express’s lowest rates, it’s a competitive option. But if you need money immediately, need more than $250,000 or can’t qualify with American Express, PayPal may be a better option.
PayPal Business Loans vs. iBusiness Funding
If you’re looking for a larger or longer-term loan, iBusiness Funding’s business loans come with terms of up to 300 months for SBA loans and up to 60 months for traditional term loans, allowing you to spread out higher costs over a longer time frame.
But while iBusiness Funding offers relatively quick funding for its traditional term loans, SBA loans can take up to a month or more to fund.
In the end, which is the better option will likely come down to what interest rate you qualify for — but you’ll need to apply to learn.
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