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PayPal Working Capital: 2023 Review
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Pros and cons of PayPal
| Pros | Cons |
|---|---|
Low annual revenue requirements Modest time-in-business requirements Quick funding No credit check for working capital loans and lower minimum credit score requirements for business loans | You must have a PayPal Business or PayPal Premier account. In some cases, you must do significant sales with your PayPal account to qualify. Fees are not disclosed, making it difficult to compare PayPal to other lenders. If you need to borrow more than $250,000, you’ll need to look to another lender. Not available to businesses located in Virginia. |
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PayPal small business loans review
PayPal operates primarily as a way to send and receive money, and as a way to make online payments. But it also offers a couple business lending products through its business partner WebBank. You can either get a business loan that operates a lot like a term loan, or a working capital loan that is repaid through a set percentage of your PayPal sales. The advantage of PayPal business lending is that you can secure it with less-than-excellent credit, low annual revenue, and after a relatively short time in business. Funding happens at lightning speed, but the amount you can borrow is somewhat limited.
Who is PayPal business lending for?
- Businesses with low annual revenue. Annual revenue requirements are exceptionally low through PayPal business lending, ranging from $15,000 to $33,000.
- Businesses who process a lot of transactions through PayPal. Having a solid record with PayPal may help you qualify for better terms on a business loan. And it’s essentially the only thing that matters when you’re applying for a PayPal working capital loan.
- Business owners with less-than-perfect credit. Your credit history is irrelevant when you apply for a PayPal working capital loan. When you apply for a PayPal business loan, you will only need a credit score of 580 in order to qualify.
PayPal small business financing at a glance
| Product | Loan amounts | Repayment term | Estimated APR range | Fees |
|---|---|---|---|---|
| PayPal Business Loans | $5,000-$150,000 | About weeks to weeks | Not applicable | Fixed fee dependent on factors like credit score, business health, proprietary PayPal data, etc. $20 return item fee |
| PayPal Working Capital | $1,000-$250,000 | Pay at least once every 90 days with a percentage of your PayPal sales until balance is paid in full. | Not applicable | Fixed fee dependent on factors like your sales processing and other PayPal data. |
Term loans
PayPal business loans are akin to business term loans you might find with other lenders. First-time borrowers can take out a loan for anywhere from $5,000 to $150,000. Terms on these loans range from weeks to weeks, and payments are due weekly.
It is difficult to compare PayPal business loans to other term loan products as PayPal does not charge APR or interest. Instead, it charges a single, fixed fee, but PayPal does not disclose a range. It does say that the fee varies depending on things like your credit history and overall business health. The only other fee is a $20 charge if your payment is returned.
Working capital loan
PayPal’s working capital loans operate differently than a term loan. Rather than making a payment at set intervals, you’ll make payments every time you bring in revenue through PayPal. When you first sign up for a working capital loan, you will set the percentage of each sale that goes towards paying off your loan.
You must make a payment at least every 90 days, even if you don’t have any PayPal sales in a 90 day period. Otherwise your loan falls out of good standing. Minimum payments are 10% of the loan balance and fixed fee if your loan is projected to be paid off in 12 months. If your loan is projected to take more than 12 months to pay off, the minimum payment is 5%.
The first time you sign up for a PayPal working capital loan you can borrow $1,000-$150,000. If you’re a repeat customer, you can borrow up to $250,000. Like its term loans, PayPal charges an undisclosed fixed fee on its working capital loans.
PayPal borrower requirements
You will need a credit score of at least 580 to meet PayPal business loan requirements. Your business must bring in at least $33,000 annually, and you must have been in business for at least nine months. You will also need a PayPal Business account.
Requirements are lower for working capital loans. Since you’re borrowing based on your PayPal history alone, you need to prove that you bring in at least $20,000 annually in PayPal sales with your Premier account. If you have a PayPal Business account, you only need to prove that you bring in at least $15,000 annually. Your account needs to be at least 90 days old, regardless of if you have PayPal Premier or PayPal Business. There is no credit check involved with these working capital loans, so your credit score doesn’t matter.
Working capital loans are not available in the states of North Dakota, South Dakota and Virginia.
Required documents
In most cases, you won’t need any paperwork for a PayPal working capital loan because everything is based on your PayPal history. But for some business types, you may be required to provide the following information for any business owners or managers:
- Contact details
- Birth dates
- Social Security numbers
You may have to provide this same information plus additional paperwork for a PayPal business loan, depending on the volume of business you do directly through PayPal.
Alternatives to PayPal
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| PayPal | Credibly | American Express | |
|---|---|---|---|
| Minimum credit score | None for working capital loans 580 for business loans | 500 for working capital loans and merchant cash advances 600 for business loans | 660 |
| Loan products offered | Working capital loans Business loans | Working capital loans Business loans Merchant cash advances | Term loans |
| Time to funding | Within minutes of application approval for working capital loans. As soon as the next business day for business loans. | As soon as the same day | 3 to 5 business days |
| Starting rates | Rates not shared publicly. | 1.15 factor rate on working capital loans and merchant cash advances 9.99% APR on business loans | 6.98% to 19.97% APR $39 late or insufficient funds fee |
| Maximum loan size | $250,000 for working capital loans $150,000 for business loans | $400,000 for working capital loans and merchant cash advances $250,000 for business loans | $75,000 for business loans |
| Minimum annual revenue | $15,000 for working capital loans $33,000 for business loans | $180,000 | No explicit revenue requirements |
Rates accurate as of Aug. 22, 2022.
It’s not easy to compare PayPal business lending products to other lenders as it doesn’t share rates. It’s a good idea to get individualized quotes from each of these lenders before deciding one is ultimately ‘better’ than the other. After you consider rates, here are some of the other key differences that may help sway your decision.
PayPal vs. Credibly
Credibly tends to be better for established businesses with higher revenue. PayPal allows you to qualify for funding with as little as $15,000 in annual revenue, but Credibly requires $180,000. PayPal requires you to have been in business for three to nine months to qualify for business lending products, while Credibly requires six months or three years. The amounts Credibly loans out are markedly higher than anything PayPal will give you on a single loan, though you can get funding from both lenders as soon as the same day.
PayPal vs. American Express
You can borrow more money with PayPal than American Express and PayPal also funds loans dramatically faster than American Express. American Express rates are competitive, though, while PayPal’s are unknown. If you qualify for an American Express business loan – by having an American Express business card that’s been open for at least 12 months – you’ll still want to get a quote from both lenders before deciding which option is best for you.