PayPal Pilot :Merchant Cash Advances
PayPal is running a small pilot to assess the appetite of business customers for merchant cash advances from a specialist third party company. This program is called PayPal Merchant Cash Advance and qualified retailers can borrow up to £25,000 against future PayPal income.
The working capital will paid as a lump sum directly into the retailers PayPal account and they then pay back the advance back at an agreed rate as they earn from their customers. The automatic pay-back payments are based on an agreed percentage of daily PayPal sales receipts so if you have a good month you’ll pay back more, but if sales drop, for instance if they dip during the Olympics, then you’ll pay back less each day.
I quite like the way this works, it means that once you’ve agreed a pay-back rate (say 12% of PayPal income), then the cash advance will be repaid at that rate as you earn.
The program is being run in conjunction with United Kapital who provide the cash advance funds. Currently it’s an invite only program and is an experiment for PayPal. We’ll let you know if and when we hear that the program is available to all retailers.
David Brackin says
2:07 pm on 13/07/2012
I thought that the Paypal Faster Payments service was coming into effect on 12th July (see previous Tamebay article).
This would have a far larger effect on cash than a £25k short-term loan from United Kapital.
Does anyone know the rates or terms? How do they compare with the lovely people from iwoca, for example, who have made a real invesment in the seller community.
whirly says
6:41 pm on July 13th, 2012
Also hoping to see Paypal Faster Payments this week, doesn’t appear to have happened.
No real surprise, supposed to have Product Bundles last May http://sellerupdate.ebay.co.uk/may2011/shopping-basket.html
“Start thinking about new product bundles” I have eBay, for 14 months.
Any chance before I retire?
Clarky says
10:03 pm on July 14th, 2012
I wouldnt hold your breath for bundles, I asked about this last week and the woman on the phone didnt know what they were. She is “looking into it” but the time elapsed gives me no confidence!
st georges dragon says
4:21 pm on 13/07/2012
very interesting, funding at the right price is always welcome,
downloads to our bank from paypal are now instant, its quite refreshing
Dave s says
5:39 pm on 13/07/2012
We were offered this. It’s basically just a loan and the interest rates were poor. Better off borrowing on a personal credit card or loan and lending the money to your company.
Chris Dawson says
6:03 pm on July 13th, 2012
The thing I think is cute about it is that you pay back a percentage of receipts. Nothing worse that struggling to service a loan when you have a quiet month but with this you know you’ll only pay when the money rolls in.
st georges dragon says
6:17 pm on July 13th, 2012
bet ya paypal wont let you get away with a slow month, or you could borrow their money take cheques or sell elsewhere, and take your time paying,
David Brackin says
8:13 pm on July 13th, 2012
Surely they can just increase your amount “on hold” if you have a slow month and get their cash that way?
There’s no way of knowing how much is on hold on your account so it’s very hard to hold them to account on that figure.
Dave S says
6:57 pm on July 13th, 2012
Yeah, I suppose there is the advantage of being able to pay back a smaller amount on a slow month, but then again, you could do that with an overdraft which is considerably cheaper than the 27% that they charge.
The 27% isn’t an APR, so it’s hard to compare, but in their example, they use a 7 month period to pay it off, that would put their APR VERY high.
On the other hand if you can drag it out over a few years it would be good value, although I don’t expect that they will accept applications from anyone who can’t pay back quickly.
sam baitz says
5:18 pm on July 15th, 2012
paypal program might be expensive- but my companies programs are very competitive.but the concept is a great idea-you need to factor in 80% of business that cannot even walk into a bank
or deal with any other lending entity
check out here for articles pertaining to this new program for business funding.
http://shieldfunding.com/2012/06/merchant-cash-advance-repayment-methods/