PayPal Working Capital is a business loan for PayPal sellers that you can apply for in minutes and immediately access through your PayPal account. Through PayPal Working Capital, borrowers can qualify for up to 30% of their annual PayPal sales, with a maximum of $97,000 for the first loan.
PayPal Working Capital, as the name suggests, is for business owners who need working capital—that is, funds to cover the day-to-day functions of their business.
PayPal business loans are one of several options for finding working capital to keep your business growing. Find out if PayPal Working Capital is right for you, the cost and terms of the loan, and the best alternatives to consider when loan shopping.
LOAN DENIAL TROUBLESHOOTING
The reason for a denial isn’t always easy to determine. Merchants report on the community forum that the application simply turns up an error code with no further explanation. The most common problems appear to be an identification error (the system could not verify your information), error code 646 (you have abnormal sales), error code 641 (sales holds or a pending balance on your account), or you’re applying too soon after paying off another loan.
Based on reports from other merchants, here is what you can do to get your application accepted:
- Wait Three Days: If you have just paid off a loan, PayPal advises merchants to wait at least three days before applying for another so that the system has time to process the status of your old loan.
- Check Your Business Information & Address: If you’re getting an identification error, it may be because your information was entered incorrectly (or in a way the system doesn’t like). Make sure your information is accurate. If that doesn’t work, try changing the abbreviations or formatting choices, such as changing “Boulevard” to “Blvd.”
- Clear Your PayPal Credit Balance: One merchant reported that they had success getting a loan after clearing their PayPal Credit balance.
- Keep Applying: If it’s been at least three days since you paid off the balance, your account is in good standing, and you aren’t getting an identification error, your best bet may be to keep applying every day. PayPal does not penalize you for doing so, and many merchants have reported that they were suddenly eligible one day for no apparent reason, even after being denied the day before.
Although PayPal often doesn’t provide a reason for denial upfront, it does send out a more thorough reason for denial via snail mail. As such, you may be able to get a more clear explanation for the rejection within a couple of weeks.
If you keep getting denied and don’t have time to keep applying, you might want to seek out an alternative lender. Fortunately, most lenders will be able to give you an initial approval or denial in a few minutes. Loan Builder, a PayPal service, offers decent rates and quick funding, so it’s a good place to start.
PayPal working capital loans are relatively simple to qualify for if you are already a fairly active PayPal merchant. You just need to have a PayPal Business or Premium account for at least three months and a minimum of $15,000 (for Business account holders) or $20,000 (for Premium account holders) in annual PayPal sales.
PayPal Working Capital doesn’t require a credit check or credit history, so it’s a good option for business owners who need to improve their credit. Whereas your credit score is extremely important for bank loans, SBA loans, and medium-term loans, it’s not at all a factor in a PayPal working capital loan. Instead of using your credit score to determine your eligibility, PayPal relies on your sales history to determine if they’ll work with you.
Rates and Terms
For term loans, business can apply for $5,000 to $500,000 with terms ranging from 13 to 52 weeks. Compared to other lenders we evaluated, this is a short-term loan option. PayPal advertises on its site that this type of loan provides fast cash with lower qualifications and requirements than big banks. PayPal syncs directly with your bank account and automatically deducts weekly payments until the loan term is complete. There are no additional fees with this loan, except for a $20 returned-item fee that is only assessed if a payment is returned. You can pay back the loan at any time, but you’ll have to pay the full principal and interest at the time of the payment.
Individual interest rates on these loans vary depending on your business’s financial situation. PayPal doesn’t advertise its rates publicly, but you can get a quick idea of what your business qualifies for by filling out and submitting an application. The application is not a commitment and is a good way to inquire what your overall loan situation would be. While the rates are not available publicly, PayPal says its rates are fixed and do not fluctuate throughout the loan term.
Besides favorable pricing and terms, there are other features that make PayPal’s loan service ideal for small business owners. The qualifications are fairly lenient compared to its competitors, and small businesses can enjoy a quick loan process and fast turnaround.
Interested business owners can complete an application online or over the phone. The application asks for basic business information, like name, address and years in business. PayPal may request additional financial information and documentation once you submit the application. You can get preapproved within minutes of submitting your application. Once your application is approved, you can then customize your loan term and amount, and get your funds.
PayPal’s term loans vary from 13 to 52 weeks, meaning you’ll have to pay back your loan within a year of borrowing the money. The working capital loan takes on a different structure. Because the loan is repaid as a fixed percentage of your daily PayPal sales, there’s no specified term on the loan. Instead, funds are deducted from your daily sales until the loan is paid off.
PayPal has various qualifications, depending on what loan you’re applying for. For term loans, there are several minimum requirements. You need to have been in business for at least nine months, generate at least $42,000 in revenue each year and not have any active bankruptcies. Your business also needs to be located in the U.S. and have an active business record with your secretary of state.
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