What is a paypal working capital loan and how does it work?
Do you run a business with over £9,000 per year in paypal sales? Are you looking for short term finance? If so then it may be worth considering a paypal working capital loan. It’s a flexible loan that you repay with future paypal sales.
In this guide we explain how a paypal working capital loan works and the pros and cons of using one. We also answer common questions like “am I eligible for a paypal working capital loan?” and “what are the pros and cons of a paypal working capital loan?”
Table of Contents
- What is a paypal working capital loan?
- What are the pros & cons of using a paypal working capital loan?
- How do I get a paypal working capital loan?
- Frequently asked questions?
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What is a paypal working capital loan?
A paypal working capital loan is a flexible loan designed for businesses that regularly use paypal to process their sales.
If paypal accepts your loan application, they will give you a cash advance and you will repay the loan with your future paypal sales. There are no early repayment penalties but there is a minimum repayment amount.
Here are some of the key features:
- Available for businesses with over £9,000 per year of paypal sales.
- Quick application process.
- Receive funds into your business paypal account.
- Charges fixed fee instead of interest.
- Repay the loan with future paypal sales.
- Only one paypal working capital loan at once.
- Minimum repayment amount of at least 10% of the cash advance plus the fixed fee.
How does a paypal working capital loan work?
A paypal working capital loan works by giving your business a cash advance in exchange for transferring rights over future sales revenue. You will repay the loan with future paypal sales. Here is how the loan works in detail from applying to repaying the loan:
- Complete the application form including information about yourself and your business; how much you want to borrow; the percentage of your sales you want to use for repayments.
- Paypal will assess your application and decide on your fixed fee and the minimum level of repayments.
- If your loan is approved the funds will be transferred directly to your paypal account.
- Repayments are automatically taken from your paypal account when you receive sales into your paypal account based on the percentage of sales chosen when you set up the loan.
- If you don’t have paypal sales you won’t make repayments but you do have to pay a minimum amount every 90 days. This will be up to 10% of your total cash advance (including the fixed fee). Check your terms and conditions to see how much you’ll have to repay as this will depend on your business and the options selected.
- You can make additional payments to repay your cash advance sooner without any additional charges.
What is a paypal working capital loan for?
A paypal working capital loan can be used for any business purpose. Here are some examples:
- Improving cash flow - a paypal loan can help you with cash flow problems.
- Financing seasonal businesses - you can pay for stock and repay the loan once you receive cash from sales. This is especially helpful for businesses that have a long time delay between ordering stock and receiving sales.
- Paying for temporary staff - a loan can help finance extra staff costs during a busy period.
- Expanding stock range - you can pay for extra stock to expand your business.
Am I eligible for a paypal working capital loan?
Paypal working capital loans are designed for businesses with a strong paypal trading history. You may be eligible if the following apply:
- You have had a paypal business or premier account for at least 3 months.
- Your business is registered in the UK.
- Your business has sales of at least £9,000 per year if you have a business account or £12,000 per year if you have a premier account.
- You have paid off any previous paypal working capital loans.
- You have met all these requirements for at least 5 days before your application.
What are the pros and cons of a paypal working capital loan?
Here are the main pros and cons of a short term business loan:
Pros
- One fixed fee - no additional charges for early repayment or fluctuating borrowing.
- No interest - you won’t be charged interest payments, but instead you’ll pay one fixed fee.
- Flexible - you can choose the cash advance amount and repayment percentage to fit your business needs.
- Simple application process - apply online and if you’re approved you will receive funds within minutes straight into your paypal account.
Cons
- Not suitable if you don’t use paypal - you must have at least £9,000 per year of paypal sales to be eligible.
- May have to repay whole loan - if you fall behind with your minimum repayments you may have to repay the whole loan.
- Difficult to compare costs - because paypal charges one fixed fee rather than interest payments, it can be difficult to compare a paypal loan with other lenders.
- Limits future borrowing options - you’re securing borrowing against your future sales so you won’t be able to take a merchant cash advance with another lender.
Is there anything else to consider
A paypal working capital may appear good value because you’ll be charged one simple fee rather than interest and other fees. But it might not necessarily be the cheapest option for your business. It makes sense to shop around and compare the total costs of a paypal working capital loan to other short term business loans before you apply.
It’s a good idea to compare the fixed fee on your paypal working capital loan quote to all the costs for other business loans. Include interest rates, annual and monthly fees and early repayment penalties to the fixed fee on your paypal loan application to see which is a better deal.
Other alternatives to a paypal working capital loan
There are several alternatives to a paypal working capital loan including the following:
- Bank overdraft - works like a personal overdraft where you’ll only owe interest on the outstanding balance at any time. It can be risky, as lenders can withdraw your overdraft facility with no notice.
- Working capital loan - an umbrella term that includes short term loans, business lines of credit and merchant cash advances.
- Asset finance - used to buy or lease assets, the loan is usually secured on the assets and can be short or long term.
- Invoice finance - lenders advance cash based on the value of your invoice book. You repay the loan when cash is received from customers.
- Business line of credit - a flexible business loan where you borrow and repay cash up to an agreed limit.
- Merchant cash advances - designed for businesses that use a card machine. The lender advances money in exchange for a percentage of future cash revenue.
Or you can apply for a small business loan with a company like Iwoca. The application is quick and decisions are made within 1 working day:
Get a small business loan with Iwoca. Apply now.
Get started
- Borrow from £1,000 to £200,000 over 12 months
- Repay early with no fees
- Decisions in 1 working day
- Help from a dedicated account manager
How to apply for a paypal working capital loan?
The application process for a paypal working capital loan is designed to be quick and simple. Paypal will perform their own credit checks and you will need to fill in an online form with the following information:
- Personal details and information about your business.
- Information on how much you want to borrow.
- Details of what percentage of your sales you will use to repay the loan.
You may be asked for further information about your business depending on your circumstances.
Loans are usually assessed quickly but may take longer to arrange during busy periods. If your loan is approved, the funds will be transferred to your paypal account straight away.
Frequently asked questions
Taking out a paypal loan won’t affect your credit score. That’s because paypal don’t share information about your loan with credit reference agencies.
Paypal charges one fixed fee on their working capital loans. The fee varies from business to business and is based on your paypal sales and account history; the amount you want to borrow and your agreed repayment percentage.
Paypal will perform personal and business credit checks as part of their application process. That means you may not be able to get a paypal working capital loan if you have bad credit.
Paypal does not charge interest on their working capital loans. However they do charge a fixed fee based on the amount of your loan and how quickly you plan to repay it. You should compare the cost of these fixed fees with the interest and other costs of other loans you’re considering.
A paypal working capital loan is secured on your future sales. Paypal will have a right to a certain percentage of your future sales, depending on the terms of your agreement.
As a new business, you will only be eligible for a paypal loan if you’ve been trading with paypal for at least 3 months and have sales of at least £9,000 through paypal.
The maximum paypal working capital loan varies and is based on your paypal sales volumes, account history and if you already have a paypal working capital loan.