You must be an existing PayPal business client to get approved for its small business or working capital loan. Otherwise, the loan application process is simple and fast.
Borrowers do not pay interest on the borrowed amount from PayPal and only pay a fixed fee. They repay the loan amount with auto deductions from their accounts and pay a fixed percentage of their daily sales amounts.
Let us go through the details and discuss how hard it is to get PayPal financing, its credit score, and other requirements.
What is PayPal Financing?
PayPal financing offers two types of loans to businesses; working capital and small business loans. These loans are available only to businesses that use PayPal.
Unlike traditional loans, these financing options do not charge a predetermined interest rate. Instead, PayPal charges a fixed loan fee that is calculated according to the loan amount and loan term.
Small Business Loans
PayPal offers small business loans to its users. New users can borrow an amount ranging from $5,000 to $1,00,000. Existing business clients can get a small business loan of up to $150,000.
This business loan is available for businesses having an account with PayPal for at least 9 months and annual revenue of $33,300 or above.
Although PayPal does not require a credit check, it states a minimum credit score of 580 for the business owner. It means that small business owners’ creditworthiness comes into play as well.
The repayment terms for this loan are also different from traditional bank loans. Borrowers must repay using a proportion of daily sales instead of fixed monthly installments.
The repayment amount is calculated in percentage in terms of daily sales and the borrower must make at least 5% or 10% of the total loan amount within every 90 days.
Working Capital Loans
The loan terms for the working capital financing from PayPal are similar to the small business loans discussed above.
This financing option is also available to PayPal customers with a working account at least 9 months older. There is no officially mentioned working capital loan limit, however, it is expected to be around $125,000 for new customers and $250,000 for older ones.
Working capital loan repayments also work similarly and borrowers pay a fixed percentage of daily sales. If there are no sales, they do not make a payment.
Working capital loans from PayPal are processed faster than business loans though. Borrowers must show a recent average sale figure of $20,000 or an annual sale figure of $15,000.
Loan application processing for both types of loans is online. There are no significant documentation requirements and applicants can complete the full process within a few minutes.
How to Apply for PayPal Financing?
You can apply for a PayPal business loan or a working capital loan online. These financing options are only available to businesses using its services.
Here are a few key steps in the process.
Preapproval
You can check your loan eligibility online before applying. The borrowing business’s owner must have a credit score of 580 or above.
You must be using PayPal services for at least 9 months and meet the minimum annual sale requirements. There is no hard inquiry on your credit history though.
Understanding Requirements
Then, gather some important business information including the applicant’s name, address, and social security number of the owner.
Also, estimate your total financing requirements and the cost of borrowings here. Your loan installment will be directly deducted from the PayPal account and will be a percentage of the daily sales figure.
Therefore, the higher the loan amount the higher the percentage of sales go to loan repayments.
Applying for a Suitable Financing Option
Once you have completed the preapproval research, you can apply for a small business loan or working capital financing depending on your business needs.
- Log in to your business account and verify your information.
- Select the loan type, loan amount, and loan term.
- Choose your repayment terms and select a fixed percentage of the daily sales figure.
- Review and accept the offer.
- Submit the application for review and approval.
How Hard is it to Get a PayPal Business Loan?
The first challenge to getting financing from PayPal is availability. It is not available to all businesses and only PayPal users can apply for these loans.
Then, you must have an account older than 9 months at least. Also, you must meet the minimum annual sale requirements to qualify for the loan.
The loan application process is online and can be completed within a few minutes by providing the necessary information.
Although PayPal does not require a credit check, it states a minimum credit score requirement of 580 or above from the applicants.
It means borrowers having a bad credit score may face difficulties in getting a loan from PayPal. Your credit score may also affect the loan amount and the loan term.
In short, the loan process is simple and quick. The eligibility criteria are not too challenging for small businesses as they do not require a hard credit inquiry.
The only challenge is to become a creditworthy customer and show your credentials for loan approval.
Credit Score and Other Requirements to Get PayPal Financing
PayPal does not require a credit score as a precondition for small businesses. However, it requires a minimum credit score of 580 from business owners.
Other eligibility requirements for small business loans include:
- Annual sales of $ 33,300 or above.
- An account history of 9 months.
- No existing loan with PayPal.
- Business contact and other information.
- Business owner’s personal information, contact details, and social security number.
Other eligibility requirements for the working capital loan include:
- Annual sales of $15,000 for existing and $20,000 for newer customers.
- Account history with PayPal of at least 9 months.
- No existing loan with PayPal.
- No personal bankruptcy of the business owner.
PayPal may require a pledge from a business as collateral. It depends on macroeconomic factors, a business’s financial strength, and the creditworthiness of the owners generally.
Important Considerations with PayPal Business Loans
PayPal financing is similar to merchant loan advances rather than business or revolving credit facilities offered by commercial banks.
Here are a few key points to remember when considering PayPal financing:
- PayPal approves your financing limit depending on several factors including your annual sales figure.
- There is no predetermined interest rate which means estimating the loan cost is difficult.
- Your repayment amount is a direct proportion of the daily sales.
- Borrowers must repay at least 5% or 10% of the total loan amount every 90 days.
- If your daily repayment amount does not recover the loan amount, you must repay the loan amount within the loan term.
- Borrowers cannot apply for multiple financing facilities.
As PayPal does not require a credit check, it also means you cannot use this loan to build credit.
Advantages of PayPal Financing
PayPal financing comes with several advantages for borrowers.
- No credit score requirements and business owners with average credit scores can also apply.
- The loan application process is online, quick, and simple to proceed.
- These loans do not require collateral from borrowers under normal circumstances.
- There are no loan originating costs, late payment fees, or other hidden costs for the borrowers.
- Repayment terms are flexible as borrowers only repay a percentage of sales they make.
- No fixed or variable interest charges and borrowers pay fixed fees embedded into the loan amount.
Disadvantages of PayPal Financing
Despite several advantages, PayPal financing comes with several disadvantages as well.
- It is not available to everyone, only PayPal business clients can apply.
- It offers a relatively lower credit limit as compared to other business loans and working capital loans.
- Borrowers cannot apply for multiple loans and must pay off the full amount to apply again.
- PayPal does not reveal the fixed fee which makes it harder to estimate the loan cost.
- Borrowers must repay at least 5% or 10% of the total loan amount every 90 days even if they do not make a sale.
- On-time and early payments do not offer any benefits to borrowers.
- Borrowers cannot use these loans to build credit as PayPal does not report these loans to credit bureaus.
