PayPal have launched PayPal Working Capital loans in the US, in direct competition with the likes of Kabbage (who operate a similar service to UK loan companies iwoca and Ezbob).
Loans are based on annual PayPal sales history so there’s no credit checking – they don’t even check your credit file. There is a single, fixed fee that you’ll know before you sign up. From then on there are no periodic interest charges, penalty fees or any other fees, so you know what you’ll pay, down to the penny.
The fee that you pay is based upon how fast you choose to repay the loan. Repayments are taken as a percentage of your PayPal receipts – you choose the percentage you want to pay back and PayPal will let you know the upfront fee that’ll be added to your loan amount.
There are a few conditions – for instance not withdrawing all your daily takings, you have to leave enough in your account from today’s takings so that PayPal can collect your loan repayment tomorrow. However if you have a day when you don’t make any sales then you won’t have to make a loan repayment that day.
This sounds very similar to the PayPal Merchant Cash Advance that was trialled in the UK back in 2012. The trial didn’t get many customers from what I hear and has now closed. Based on the UK experience it’ll be interesting to see what the program takeup is in the States and whether US PayPal users would prefer to borrow from PayPal or from Kabbage. Kabbage can also assess your Amazon, Yahoo!, Etsy and Shopify sales which won’t all be recorded in your PayPal account and so may result in you being offered a larger loan… and be enough to stop their business being decimated.