PayPal offers a convenient way for businesses to accept payments from customers all over the world. Need money faster? Eligible small business owners who use PayPal will often be offered financing directly from PayPal. Here’s how that works.
Does PayPal Let You Borrow Money?
Yes, PayPal Working Capital offers business owners who qualify quick funding with no credit check.
What is PayPal Working Capital?
If you have had a PayPal Premier or Business account for at least 90 days you may be invited to apply for PayPal Working Capital, a short-term business loan offered directly by PayPal.
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How Much Can I Borrow From PayPal Working Capital?
You can apply for $1,000-$150,000 while repeat customers can borrow up to $250,000.
Features, Rates, and Terms of PayPal Working Capital
The amount you receive will be based on your PayPal account history. You will repay your PayPal Working Capital loan by designating a percentage of future PayPal sales to go toward repayment.
The cost of a PayPal Working Capital loan is expressed as a fixed fee, not an interest rate. This makes the overall cost clear, but can make it hard to compare the cost to other types of financing such as bank loans or business credit cards that use an Annual Percentage Rate to describe costs. Note that you agree not to use loan proceeds for personal purchases, only business or commercial purposes, and you cannot use funds to purchase real estate.
The cost of a PayPal Working Capital loan is expressed as a fixed fee, not an interest rate. This makes the overall cost clear, but can make it hard to compare the cost to other types of financing such as bank loans or business credit cards that use an Annual Percentage Rate to describe costs.
PayPal Working Capital Loans Based on Percentage of Sales
You will repay your PayPal Working Capital loan by designating a percentage of future PayPal sales to go toward repayment.
PayPal doesn’t disclose the exact repayment terms until you apply. It does state the repayment fee will be based on your business’s PayPal sales history, your loan amount, and the repayment percentage you choose. The higher the percentage payment you choose, the lower the fee.
When choosing your repayment percentage, keep in mind that payments will be taken out of future PayPal sales, and higher repayment percentages may impact your cash flow. Don’t forget that PayPal’s fees will also reduce the net amount you receive.
If you are approved, you can be funded immediately and then as you make future sales through PayPal, the loan fee will be taken out of future sales at the agreed upon payment percentage until the balance is repaid.
There is no penalty for early repayment, and you are free to make extra payments if you choose.
A minimum payment is due every 90 days.
PayPal Working Capital is funded by WebBank and marketed and serviced by PayPal. WebBank and PayPal are not affiliated with one another.
Pros and Cons of PayPal Working Capital
Pros
- Quick approval
- Fast funding
- No personal guarantee
- No credit check
- Payments reduced when sales are lower
- Clear repayment amount
Cons
- Can be hard to calculate interest rate
- Cost may be higher than other types of financing
- Unpredictable payments may impact cash flow
- Minimum payment required every 90 days
How to Qualify for PayPal Working Capital
Eligibility is pretty straightforward. In order to qualify for a Paypal Working Capital loan you will need to have a PayPal Business or PayPal Premier account opened for at least 90 days. You must process at least $15,000 in annual PayPal sales if you have a PayPal Business account. For those with the Premier Paypal account, that minimum is $20,000.
Application Process
The application process is straightforward as long as you meet eligibility requirements. You apply online within your PayPal account. PayPal says you can be approved in as little as five minutes if you meet the qualifications.
Some business owners may be asked to provide additional information such as contact information for other business principals.
Applying for a PayPal Working Capital loan does not require a good personal credit score, as there is no personal credit check or business credit check.
You cannot have an existing PayPal Working Capital loan. If you do, you’ll have to repay it before applying for another one.
How PayPal Working Capital Compares to Other Lenders
Like many types of online financing, PayPal Working Capital offers a much simpler application process than traditional bank loans. Because PayPal has information about your PayPal sales, the application process is fast and easy.
However, that speed can come with a cost. This type of financing may be more expensive than other loans or lines of credit. It’s most similar to a business cash advance or merchant cash advance.
The biggest drawback is that it can be hard to understand how much you’ll pay in terms of an interest rate, making it difficult to compare the cost to other types of financing your business may be eligible for.
You may end up paying more than if you shopped around for a small business loan or financing. Some business credit cards may be less expensive.
Just as PayPal sales help you qualify for a PayPal Working Capital Loan, revenues in a business bank account can help you qualify for other types of business financing.
Just as PayPal sales help you qualify for a PayPal Working Capital Loan, revenues in a business checking account can help you qualify for other types of business financing.
Alternatives to PayPal Working Capital
Other types of business financing that may offer comparable funding speed include:
- Business credit cards
- Invoice factoring
- Business cash advances
- Lines of credit
- Vendor terms
Business credit cards
Business credit cards are an especially appealing option for startups, as they typically don’t require proof of business revenues. It’s possible to qualify based on household income and not just business income. A 0% APR credit card offers up to a year or more of interest-free business funding if you qualify.
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Invoice factoring
Invoice factoring or financing is an option for businesses that sell goods or services to other businesses. Instead of waiting for the customer to pay in 30, 60, 90 days or more, the type of financing offers funding right away. With factoring, you sell or assign your invoices to another company at a discounted rate for cash immediately. The factor then collects the invoiced amount from the company that owes you money.
Business cash advance
This type of funding is very similar to PayPal Working Capital. A merchant cash advance or business cash advance evaluates your past sales volume to advance the business funds against future sales. Weekly or even daily payments may be required to pay it back.
Lines of credit
A line of credit can be a good option for short-term working capital. Lines of credit allow borrowers to have access to a set credit amount and they can then borrow against as needed. Once you repay the balance, you can borrow again. It’s one of the most popular business loan options.
Vendor Terms
Your business vendors or suppliers may offer your business vendor terms. You can buy goods or services and pay for them later. While not ideal for long-term financing, vendor terms can range from net-10 to net-180 or longer. (Net-30 terms means you have 30 days from the invoice date to pay.) A personal credit check is rarely required.
Other small business loans
As your business grows, you may want to consider loan options that offer more predictable monthly payments and lower interest rates including microloans, term loans or even SBA loans.
Good business credit scores can help your business increase its funding options.
Nav makes it easy to find small business loans and other financing options based on your qualifications.
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Frequently asked questions
Is PayPal Working Capital considered income?
PayPal Working Capital is a type of loan and loans are not considered income unless they are not repaid. In the event your business defaults on a business loan, it may be considered income at some point and trigger a tax liability.
Is PayPal Working Capital the Same as a PayPal Business Loan?
No. The PayPal Business Loan is another product offered through Webbank. It offers a fixed-term small business loan based on your overall business health. Loan amounts range from $5,000-$100,000 for first-time borrowers and up to $150,000 for repeat borrowers.
You will fill out a questionnaire to assess your eligibility, and answer questions about your business as well as personal details such as your Social Security Number. If you then decide to apply, there will be a personal credit check that can impact your credit score.
In addition to a PayPal business account, you must have at least $33,000 in annual revenue and at least 9 months in business.
Similar to Paypal Working Capital, if your loan application is approved, funds are transferred to your PayPal Business account as soon as the next business day.
What Happens if You Default on PayPal Working Capital Loan?
If you don’t pay your PayPal loan you can go into default. If that happens, PayPal may require the entire loan to be due immediately. Your account may be subject to collections and/or legal action.
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Gerri Detweiler
Education Consultant, Nav
Gerri Detweiler, a financing and credit expert, has been featured in 4,500+ news stories and answered 10,000+ credit and lending questions online. In addition to Nav, her articles have appeared on Forbes, MarketWatch, and Startup Nation. She is the author or co-author of six books, including Finance Your Own Business, and she has also testified before Congress on consumer credit legislation.