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PayPal, widely known as a worldwide online payments system that serves as an electronic alternative to traditional methods such as checks and money orders, also provides funding to small businesses through its Paypal Business Loan and Paypal Working Capital divisions.
PayPal Business Loan
PayPal Business Loans are available to businesses located within the United States that have been operating for at least nine months, show no prior bankruptcies, generate a minimum of $42,000 in annual revenue, and possess a PayPal Business Account – although processing payments through Paypal is not required. (As will be the case for PayPal Working Capital loans, to be discussed shortly.)
PayPal Business Loan amounts range from $5,000 to $500,000, and offer terms ranging from 13 weeks to 52 weeks, depending upon the amount of the loan. After completing a brief questionnaire online or via telephone to assess a business’ eligibility, potential borrowers can customize loan amounts and terms to compare costs of financing.
During the underwriting review of an application, credit checks are performed on both the business owner and business, and PayPal often requests additional financial documents beyond the required four months of business bank statements. If a business is approved, funds can be transferred from the lender (Celtic Bank) directly into the business’ Paypal account the following business day.
PayPal Business Loan Fees and Repayment
Instead of utilizing interest rates, PayPal Business Loans come with an upfront fixed fee that is determined by Celtic Bank as a function of creditworthiness, an overall assessment of the business’ health, and the amount and terms of the loan.
Repayment follows a regular schedule that involves automatic payments withdrawn from the business’ bank account on a weekly basis. There is no prepayment penalty in the event of early repayment of the principal, but PayPal Business Loans do require a personal guarantee.
PayPal Working Capital
PayPal’s other merchant financing division, PayPal Working Capital, provides business loans in a rapid and convenient manner, often providing funding within minutes of a completed application. PayPal Working Capital loans are available to businesses that have had a PayPal Business Account for at least ninety days and that have processed a minimum of $15,000 with Paypal over the previous twelve months.
Paypal Working Capital loan amounts range from $1,000 to $125,000, and there is no credit check, as the lender (WebBank) relies upon a business’ Paypal sales history in making a lending decision. If approved, a business owner is often permitted to borrow up to a level of 30% of annual Paypal sales, with a maximum loan of $97,000 allowed initially. Repayments are automatically deducted daily from the Paypal Business Account as a percentage of each sale until the loan amount and fixed fee are paid back in full.
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PayPal Working Capital Fees and Repayment
Instead of utilizing interest rates, PayPal Working Capital loans attach a fixed fee that is determined as a percentage of the loan principal and can vary considerably. The fixed fee percentage depends upon the loan amount, annual level of PayPal sales of the business, and the repayment percentage – the percentage of ongoing PayPal sales that a business owner chooses to be taken out daily to pay off the loan. Paypal includes a link to a sample fee calculator from its Paypal Working Capital FAQ page.
In general, the higher the repayment percentage, the lower the fixed fee will become. With repayment percentages varying from 10% to 30%, the fixed fee can be less than 10% of principal (in the case of a repayment percentage of 30% and a loan amount considerably less than 30% of annual sales) or the fixed fee can be onerous and exceed 80% of principal (as can be the case with a repayment percentage of 10% and a loan amount of 30% of annual sales).
The good news is that the business owner can mitigate the cost of the fixed fee by choosing a higher repayment percentage and lower loan amount relative to annual Paypal sales. Additionally, there are no prepayment fees and a personal guarantee is not required.
Business Debt Settlement
Sometimes, even with the best of intentions, a small business owner can run into financial difficulties. If you are currently burdened by high levels of business debt, the process of pursuing debt settlement may make sense for you and your small business.
Debt settlement occurs when a debtor successfully negotiates a payoff amount for less than the total balance owed on a debt. This lower amount is agreed to by the creditor and is fully documented in writing. Though creditors are under no legal obligation to accept debt settlement offers, negotiating and paying lower amounts to settle debts is far more common than you may realize.
United Settlement and PayPal
PayPal recently entered the business financing marketplace. At United Settlement, we are proud to help those small businesses truly in hardship. We do not deal with businesses that are not already behind on payments and / or on the brink of closing shop. Our core values, integrity, and ethical approach helps us maintain strong working relationship with juggernauts such as PayPal.
Our experienced debt settlement professionals have successfully negotiated business debt settlements with PayPal for clients who truly were facing serious financial hardship and stress that have resulted in large saving the total balance owed. At United Settlement, our experienced business debt settlement specialists possess past relationships with PayPal and more small business lenders.
Our team has an expert level understanding small business landscape, we know when a business is facing hardship and can help get you to financial freedom. See if you qualify for small business debt relief.