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PayPal Business Loans Review

By
Matt D'Angelo
,
business.com writer
|
Apr 17, 2019
Home
> Finance
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PayPal offers small businesses both working capital and traditional term loans to SMBs. You'll need a PayPal Business account to acquire these loans. As a reputable company, PayPal's loan offering is backed by a major financial institution that's qualified to provide you with the funding you need. If you can't qualify with a traditional bank, PayPal offers relaxed qualifications and a competitive agreement structure. There aren't any hard credit inquiry requirements, as the company will consider your monthly income as evidence of your financial stability. If you're initially approved, the company will likely conduct a credit and public records check before completing the approval process (this is only for term loans).

PayPal Business Loans

PayPal Business Loans

The Best Business Loan and Financing Options of 2019

The Verdict

PayPal provides businesses with working capital and traditional term loans. The working capital loans function as merchant cash advances, where monthly PayPal sales can be advanced up to $125,000.

To view all our recommendations for small business financing, visit our best picks page.

Businesses that partner with PayPal can receive term loans ranging from $5,000 to $500,000 and working capital loans from $1,000 to $125,000, depending on your qualifications and monthly revenue. The working capital loan is paid back as a percentage of your monthly PayPal sales. In this sense, the working capital loan resembles a merchant cash advance – you get an advance as a percentage of your monthly income, and then a percentage of your monthly PayPal sales are removed until the loan is repaid.

PayPal can't lend to certain industries, including attorneys, financial services, environmental or wildlife organizations, independent writers or performers, and religious organizations. You can view the full list here. Overall, though, PayPal provides a compelling option for small business owners who don't want to work with a bank to get financing.  

Rates and Terms

For term loans, business can apply for $5,000 to $500,000 with terms ranging from 13 to 52 weeks. Compared to other lenders we evaluated, this is a short-term loan option. PayPal advertises on its site that this type of loan provides fast cash with lower qualifications and requirements than big banks. PayPal syncs directly with your bank account and automatically deducts weekly payments until the loan term is complete. There are no additional fees with this loan, except for a $20 returned-item fee that is only assessed if a payment is returned. You can pay back the loan at any time, but you'll have to pay the full principal and interest at the time of the payment.

Individual interest rates on these loans vary depending on your business's financial situation. PayPal doesn't advertise its rates publicly, but you can get a quick idea of what your business qualifies for by filling out and submitting an application. The application is not a commitment and is a good way to inquire what your overall loan situation would be. While the rates are not available publicly, PayPal says its rates are fixed and do not fluctuate throughout the loan term.

For the working capital loan, the holdback rate, which is the percentage of your daily credit and debit card sales the lender keeps as a repayment, ranges from 10 to 30%, which is average in the industry. If you borrow $10,000 at a factor rate of 1.25, and your holdback rate is 10%, you would pay10 % of your daily earnings to PayPal Working Capital, which goes toward your loan repayment. If you made $1,000 in sales one day and paid back 10%, that would be $100; however, if you only made $300 in sales the next day, your payment to the lender would be $30. Your rates will vary, but companies must pay a minimum of 5 or 10% every 90 days to keep the loan in good standing.

The advance amount you're eligible to receive is determined by your sales volume, varying based on your sales from the past 12 months. The maximum advance is $125,000. The payback schedule will vary on a daily basis, as it's tied to your PayPal sales.

Company Features

Besides favorable pricing and terms, there are other features that make PayPal's loan service ideal for small business owners. The qualifications are fairly lenient compared to its competitors, and small businesses can enjoy a quick loan process and fast turnaround.  

Loan Process

Interested business owners can complete an application online or over the phone. The application asks for basic business information, like name, address and years in business. PayPal may request additional financial information and documentation once you submit the application. You can get preapproved within minutes of submitting your application. Once your application is approved, you can then customize your loan term and amount, and get your funds.

Term

PayPal's term loans vary from 13 to 52 weeks, meaning you'll have to pay back your loan within a year of borrowing the money. The working capital loan takes on a different structure. Because the loan is repaid as a fixed percentage of your daily PayPal sales, there's no specified term on the loan. Instead, funds are deducted from your daily sales until the loan is paid off.

Qualifications

PayPal has various qualifications, depending on what loan you're applying for. For term loans, there are several minimum requirements. You need to have been in business for at least nine months, generate at least $42,000 in revenue each year and not have any active bankruptcies. Your business also needs to be located in the U.S. and have an active business record with your secretary of state.

If you're applying for a working capital loan, you need to have had an active PayPal business account for three months or more. You also need to process between $20,000 and $20 million annually if you have a Premier PayPal account or between $15,000 and $20 million annually if you have a Business PayPal account. You can't have any outstanding working capital loans with PayPal.

Notice that there are no hard credit requirements in either instance. PayPal emphasizes monthly income in its review process. The company says on its website that it may conduct a credit and personal record inquiry, but this step in the process won't occur until after preapproval.

Collateral

PayPal loans require a personal guarantee, which is a legally binding agreement that you will pay back the loan. Beyond the personal guarantee, businesses may not be required to put up individual assets as collateral. This is ideal for small business owners looking to protect their personal and business assets.

Time Until Deposit

Depending on how long the loan process takes, you can access your funds within minutes of signing the agreement. This is for both term loans and working capital loans.

Special Documentation

PayPal may request additional financial and business documentation after you've been preapproved. This could include various documents, like bank statements, tax returns or other financial statements. It's a good idea to have various information ready to keep the process quick and efficient.

When to Use This Type of Loan

These loans can be used for nearly any business-related purchase, including covering expenses or payroll, investing in marketing, buying new equipment, or managing cash flow. You need a PayPal Business account to take out a loan. Unlike many of the alternative lenders we looked at, it doesn't require small businesses to have a brick-and-mortar location in order to get a loan; it only requires that you be based in the United States. This provides a good avenue for e-commerce and other internet-based companies.

Both of PayPal's loans should be considered short-term loans. The term for the traditional small business loan is one year. The working capital loan, while there's no defined term, is a fast-cash-style loan that should be treated as such. In both instances, PayPal's loan offering is ideal for business owners looking to get quick access to cash.

Reputation and Customer Service

PayPal is an established company and a reputable financial services company for small businesses. As of March 2019, it is an accredited business with the Better Business Bureau, earning an A+ and one out of five stars. There were quite a few complaints on the company's page – more than 4,000. This is the highest number of complaints of any company we reviewed. However, keep in mind that PayPal is a big company that provides several different services, so these reviews may not reflect the company's alternative loan service.

Limitations

Only businesses with PayPal Business accounts can qualify for funding. This means that, unless you've established a membership with PayPal three months before requesting a loan, you won't be able to get funding.

Also, the only way to pay back the working capital loan is through PayPal's own platform sales. Other lenders that offer merchant cash advances usually partner with a wide variety of credit card providers so all credit card sales contribute to your loan balance. While this may be a drawback for some, if your business is deeply rooted in PayPal volume, then its small business loan service is a good option.

Editor's note: Need a business loan? Click the Compare Quotes button below to have our sister site BuyerZone connect you with vendors that can help.

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PayPal Business Loans

PayPal Business Loans

The Best Business Loan and Financing Options of 2019

The Verdict

PayPal provides businesses with working capital and traditional term loans. The working capital loans function as merchant cash advances, where monthly PayPal sales can be advanced up to $125,000.

Matt D'Angelo
Matt D'Angelo
Matt D'Angelo is a staff writer covering small business for Business.com and Business News Daily. After graduating from James Madison University with a degree in journalism, Matt gained experience as a copy editor and writer for newspapers and various online publications. In addition to his writing and reporting, Matt edits articles. He reviews small business services, including PEOs, small business loans and GPS fleet tracking services. He's been with Business.com and Business News Daily since 2017.