When should you stop using PayPal Working Capital?

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The time is coming when eBay will switch over to eBay Managed Payments and your eBay derived income will stop flowing through your PayPal account. It’ll be paid into your eBay account and sent directly to your bank account. This will put you at odds with the terms of any outstanding PayPal Working Capital loans you have have which could result in demands for the full outstanding balance to be paid in full immediately.

What behaviours are not permitted for customers of PayPal Working Capital?

PayPal will monitor participating accounts for unexpected drops in PayPal volume and certain other types of behaviour. PayPal can terminate your agreement and the outstanding balance may become due immediately in some circumstances, including if you:

  • Stop accepting PayPal as a payment method; or
  • Deliberately direct payment volume away from PayPal as a payment method for your business’s sales.

– PayPal Working Captial FAQs

With that in mind, when is the latest you should consider a PayPal Working Capital loan? Well, if you are in the UK you know for sure that eBay Payments will be implemented some time between July 2020 (the earliest date eBay can roll eBay Managed Payments out in the UK) and the end of 2021 (the time frame eBay have indicated worldwide roll out will be complete).

If you are in the US then eBay Managed Payments could come more quickly and of course 6,000 sellers have already voluntarily opted in. For Germany, we expect to see eBay Managed Payments voluntary trials by the end of this year. If you reside in either of these two countries (or if your eBay account is registered in the US or Germany), then it’s likely that eBay will mandate the use of eBay Managed Payments much closer to July 2020 then the end of 2021.

Whilst the time that eBay will migrate away from PayPal and mandate the use of eBay Managed Payments is almost a year away for most sellers, possibly up to 18 months away, loan periods can be relatively lengthy, especially if you opt for a relatively low repayment percentage (say 10% of sales).

Currently, if you took out a PayPal Working Capital loan today, it’s almost inconceivable that it wouldn’t be repaid by July next year. However if you decide you need access to funds in a few months time, say in the middle of your Christmas sales, then there’s a much higher chance that there will still be an outstanding balance next July.

PayPal Working Capital Loans suit many online sellers as there a single fee added to the loan but then moving forward no interest and no early repayment fees or other costs. A percentage of sales that you agree to up front is used to repay loans so if your earnings go up your loan is repaid faster and if sales dip then you’ll pay less.

There are of course other alternative providers and some can be found in the finance section of the Tamebay Guide. Whilst you many not be in the market for a loan today, check out the alternatives to PayPal Working Capital and get pre-approved today if you consider it a possibility you may want a loan later in the year.

Edited to add

We have received the following statement from PayPal:

“PayPal truly values your business and we are aware of the potential impact of eBay Managed Payments on our customers.
While the move to eBay Managed Payments will mean change, we don’t see this as a reason to not keep using PayPal Working Capital. The move will change how customers interact with PayPal – for example, PayPal won’t be able to take automatic repayments from eBay sales. However, businesses will still always have the option of making manual repayments to meet their minimum repayment requirement. We’re also introducing improvements that will make this easier to track and stay on top of as part of our wider efforts to help customers to adapt and, because PayPal Working Capital is a cash advance, changes in your repayments will have no influence on your business’s or your credit rating.
If you choose to enroll in eBay Managed Payments when it becomes available in the UK, please contact PayPal Working Capital Merchant Assistance at your earliest convenience on 0800 368 7102 (Monday to Friday 08.00am – 6.30pm) to discuss your current PayPal Working Capital cash advance and what your options are. Our goal is to support merchants through the process with viable solutions that are to both your and our benefit. We’re working proactively to develop the right strategies to help, including developing alternative funding solutions to support our merchants affected by the move to eBay Managed Payments. We’re looking forward to being able to announce further developments in this area in the near future.”

– PayPal

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