PayPal Working Capital and Business Loans: 2023 Review
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The bottom line:
PayPal Working Capital and Business Loans are relatively easy to qualify for, but fees may be confusing.
Pros & Cons
- Lenient credit score requirements.
- Low minimum revenue requirements.
- Can fund the same day or next day.
- Weekly repayments for Business Loans.
- Fees may be hard to compare to other loans.
PayPal offers two types of financing for business owners: the PayPal Working Capital loan and the PayPal Business Loan. If you process payments through PayPal, you may be able to turn to the company for either small-business loan.
PayPal Working Capital is a good fit for new or relatively small businesses with inconsistent cash flow — you can qualify with just three months of PayPal account history and $15,000 in annual sales. While this funding can be expensive, it could be helpful if you need working capital to float you through seasonal lulls or to help you cover a small expansion, like buying materials.
The PayPal Business Loan is better for larger businesses with more robust cash flow, as you’ll need annual revenue of at least $33,300 to qualify. This loan could be helpful if you need quick financing to get you through a short-lived slump — just make sure you’re confident that your sales will recover so you can keep up with weekly repayments.
PayPal loans for business are best for borrowers who:
Have bad credit. The PayPal Business Loan has a minimum FICO score of just 580, and the Working Capital loan doesn’t consider your credit score at all.
Have too little revenue to qualify for other business loans. At $15,000 for some Working Capital loans and $33,300 for PayPal Business Loans, PayPal’s minimum revenue requirements are among the lowest among business loan products.
Need funding fast. PayPal Business Loan funds can be available the next business day, and the timeline for PayPal Working Capital loans is even shorter.
PayPal Working Capital and Business Loan features
PayPal Working Capital loan
PayPal Business Loan
$1,000 to $200,000.
$5,000 to $150,000.
Instead of interest, you'll pay a single, fixed fee over the life of the loan. The higher your repayment percentage, the lower your fee.
Instead of interest, you'll pay a single fixed fee over the life of the loan.
Varies depending on your sales. You’ll need to pay at least 5% of the total loan amount every 90 days if your loan is estimated to last 12 months or more, and 10% every 90 days if you’re expected to pay it off faster.
13 to 52 weeks.
PayPal deducts a fixed percentage of your sales until the loan is repaid.
Weekly repayments are automatically withdrawn from your business bank account.
As fast as the next business day.
Where PayPal Working Capital and Business Loans stand out
PayPal Working Capital loans can be funded within minutes, while PayPal Business Loan funds can be available as soon as the next business day. That makes both options some of the fastest business loans available.
Easier to qualify for than other business loan products
For PayPal Business Loans, the annual revenue requirement of $33,300 and minimum FICO score of 580 are low compared to other online lenders.
And all you’ll need to qualify for PayPal Working Capital is three months of account history with PayPal, plus annual revenue of at least $15,000 or $20,000, depending on your account type. Your credit score isn’t considered.
PayPal Working Capital offers flexible payments
With PayPal Working Capital, your payments are based on how much revenue you’re generating.
When you apply for PayPal Working Capital, you’ll choose the percentage of your sales that you want to go toward repayment. Then, payments are automatically deducted from your PayPal account until the loan is repaid.
If you want to pay ahead, you can do so using either your PayPal balance or another bank account.
Where PayPal Working Capital and Business Loans fall short
Repayment schedule may be aggressive
For PayPal Business Loans, the lender will automatically withdraw the same amount from your business checking account every week, regardless of whether your sales are up or down. Frequent repayments can be risky if you have to borrow additional funds to keep up.
For PayPal Working Capital loans, your repayment percentage is fixed for the life of the loan. If you start out with an aggressive repayment plan and then realize you’d prefer to put cash toward other expenses, you can’t make changes.
Fees may be confusing
Instead of a traditional interest rate, PayPal Working Capital and Business Loans both charge a fee spread out over the life of the loan. In practice, this isn’t that different from making loan payments that include both principal and interest. But it might make it hard to compare the costs of a PayPal business loan with other products.
No benefit to early repayments
PayPal Working Capital charges a fixed fee instead of an interest rate. If you pay off your loan early, you’ll still owe that whole fee — so there are no savings associated with paying ahead. That said, there’s no early repayment fee, either.
PayPal Business Loans also come with a fixed loan fee. They’re repaid on a schedule that you agree to when you take out the loan, which you can’t modify.
PayPal Working Capital requirements
A PayPal Premier or Business account history of at least 90 days.
At least $20,000 in PayPal sales in the past year if you have a PayPal Premier account.
At least $15,000 in annual PayPal sales if you have a PayPal Business account.
If you have an existing PayPal Working Capital loan, you'll need to pay it off in full before applying for another round of financing.
Note that this product is not available in North Dakota, South Dakota or Virginia.
PayPal Business Loan requirements
FICO score of at least 580.
At least nine months in business.
Annual revenue of at least $33,300.
Alternatives to PayPal Business Loans
Before you get a PayPal loan, understand how it stacks up against other options in terms of total borrowing costs, repayment schedules and maximum borrowing amounts.
Online small-business loans
Online small-business loans vary widely, with APRs ranging from 8% to 99% and terms ranging from 12 weeks to 10 years. Consider these options if PayPal doesn’t seem like a good fit for you.
If you want a longer repayment period: OnDeck offers a loan with terms of up to 24 months, while PayPal loans typically are repaid in less than a year. But you’ll still have to make weekly repayments, and some OnDeck customers even make daily repayments.
If you want less frequent repayments: You’ll only need to make monthly repayments, not weekly ones, on American Express' line of credit. This loan is available to businesses with an average monthly revenue of at least $3,000, similar to what you’ll need to qualify for the PayPal Business Loan. But like PayPal, American Express also uses a non-traditional fee schedule, which can make it hard to compare costs to other lenders.
If you want a traditional interest rate: Instead of a potentially confusing fee structure, Bluevine’s line of credit comes with a standard interest rate. Like PayPal, Bluevine loan terms are still short — six or 12 months — but you can get funding as fast as the same day you apply.
If yours is a newer or smaller business, an SBA microloan may provide the flexible capital you’re looking for. Through this program, you can borrow up to $50,000 from a community-based nonprofit lender and have up to seven years to pay it off. The average SBA microloan is around $14,000.
Merchant cash advances
PayPal's Working Capital loan resembles a merchant cash advance, which takes a daily percentage of businesses' sales as repayment.
MCAs should be a last resort due to their high fees. But for cash-strapped business owners who don’t have other options, they’re an option.