PayPal’s Working Capital loans are among the easiest funds your business can qualify for, and it makes loans available faster than any other lender we’ve seen. However, while it is easy to get approved, you need to be a PayPal merchant to be eligible to apply in the first place. Loans are quite large, capping off at $200,000, which immediately makes this one of the largest loans with such lenient requirements. However, PayPal’s Working Capital has significantly higher fees and interest rates than other lenders. If you’re less concerned about getting funds fast or you have an established business with a great personal credit score, we recommend you consider other options.
- Can You Qualify for PayPal’s Working Capital Loans?
- PayPal’s Working Capital Loan Features
- Loan Amounts
- PayPal’s Working Capital Fees Explained
- How Does PayPal Compare to Other Lenders?
- vs Kabbage
- vs Square
- vs Traditional Lenders
PayPal’s Working Capital Loan Amounts
One of the major things we like about PayPal’s Working Capital loans is the actual size of the loans. They can be as large as $200,000. Other lenders typically offer working capital loans of around $200,000. However, note that PayPal typically lends 18% of your past year’s sales. So in order to hit that limit, borrowers would need more than $1 million in annual revenue. The downside to PayPal’s fast application and funding process is that there isn’t as much room for loan term negotiation as you might find with a traditional lender. In traditional situations, the application process would likely be longer, more personal and more qualitative. Additionally, borrowers are limited to $125,000 loans for the first PayPal loan, which is still sizable compared to other online lenders with similar eligibility requirements.
Cost per dollar borrowed and repayment: PayPal’s Working Capital loan’s weakest point is its high cost per dollar borrowed, as the cost range is $1.04 – $1.55. PayPal has pretty lenient requirements to qualify, and its high interest rates reflect that risk. PayPal almost does a good job of simplifying its rates payday loans Upper Sanduskyerville Ohio by using only one fixed fee. However, its cost per dollar borrowed can be a bit tricky to understand, given how repayments are tied to individual PayPal sales. We get into more detail on it below.
Lenders with similar loan size amounts like Fundation will have better costs per dollar borrowed, but the requirements are stricter as the lender does require personal credit scores and collateral.
One strength of PayPal is that it has a more flexible repayment plan than most lenders. Borrowers choose the percentage (10% to 30%) of their daily PayPal sales to allocate toward repayment. The higher the percentage, the lower the total fees. If borrowers are unable to keep up with loan payments, PayPal will allow borrowers to defer payments without late fees. Businesses that can afford the higher end of the repayment percentage will benefit from the PayPal’s Working Capital loan more than others.
Term length and prepayment: PayPal only dictates that all loans be paid off within 18 months, and most borrowers pay this off within a year. Borrowers can pay off their loans earlier, but PayPal doesn’t waive any remaining fees. In other words, borrowers have the flexibility to define their own term lengths as long as it is within 18 months, but they won’t have any prepayment discounts.
PayPal’s Working Capital Fees Explained
PayPal only charges a single fee on top of the principal balance that needs to be repaid. Borrowers choose the amount they’d like to loan out as well as the single interest fixed fee they pay. The higher the fee you choose to pay, the lower the total repaid. On a sample $8,000 loan for a business that processes $100,000 in annual PayPal sales, there is a $655 reduction in loan fees if the business chooses to pay 30% of its daily sales rather than 10%.
