PayPal Working Capital is a merchant cash advance linked directly to your PayPal account.
PayPal Working Capital provided $10bn to support 225k businesses
PayPal Working Capital have announced that they have provided more than $10 billion in funding to support more than 225,000 small businesses globally.
Bridging the financial gap
This marks six years of PayPal Working Capital support of small businesses in the US, UK, Australia, Germany, and Mexico. PayPal have provided more than 650,000 loans to help sellers bridge the financial gap in their businesses.
In 2013, PayPal launched PayPal Working Capital to lent small business owners capital to grow their companies.
In 2018, the average US Small Business Administration loan to small businesses was $420,401. The length of time it takes for businesses to receive the loan could be as long as 90 days.
PayPal say that businesses need more flexibility when it comes to borrowing loans. On average, small businesses only need a few thousand dollars to manage immediate concerns and, most often, they need it immediately.
PayPal say they can provide funding from $1,000 – $500,000 for small businesses looking for both quick decision-making and immediate usage as an application decision that usually occurs within minutes or hours which, if approved, allows the company to start using the funds almost immediately.
PayPal say that the programme helped them to understand how the funds impact businesses and how they are using the money. PayPal Working Capital recipients who experienced an increase in revenue saw an average of 24% growth after accepting the funds. Some 82% of businesses saw such results in their first three months.
How are businesses using the funds?
Paypal say that small businesses are spending the borrowed funds on four main areas:
- Purchase inventory (58%)
- Purchase equipment (28%)
- Support marketing (28%)
- Manage cash flow (23%)
How does PayPal Working Capital work?
- Merchants can apply here.
- Sellers’ maximum cash allowance amount is based on their PayPal sales volumes, account history, and any prior usage of PayPal Working Capital.
- Applying has no impact on merchants’ business or personal credit score and, if they’re approved, they’ll get their funds in minutes.
How much does it cost?
With PayPal Working Capital, sellers pay just one fixed fee which is determined by:
- Sellers’ business PayPal sales and account history.
- The repayment percentage merchants select.
- The number of sellers’ cash advance.
- The cash advance available can be up to 35% of sellers’ annual PayPal sales, to a maximum of £150,000.
- Sellers can use Use the Sample Merchant Cash Advance Calculator to see how the service’s terms work.
How do sellers repay?
For periods when merchants don’t have sales, they won’t make any repayments. However, regardless of sales volume, they’re required to meet a minimum level of repayments every 90 days.
This will be no more than 10% of sellers’ total cash advance, including the fixed fee, but the exact amount will depend on their business profile and the options they select. Sellers will be told their specific amount in their terms and during the application process. They can also make additional payments to repay their cash advance sooner – without any additional charges.
I borrowed £4,000 and the cost was £100.00
It was paid off over 90 days at a rate of 30% of my sales, which I found quite tight and not something that i have done since.
People have to watch that they don’t get stuck in a revolving credit loop, depending on your profit margin you can find after 2 months that you are back to try and increase your loan.
I also borrowed from Amazon Payments, which can have the same effect of restricting your cash flow.
My bank has since given me an overdraft, which helps cash flow and you are only paying interest on the amount you owe and no commitment to pay back a set amount.