PayPal Working Capital Review

Pros

• Borrower qualifications are lower than what banks require
• No credit score requirements
• No prepayment penalty
• The application process is fast and easy

Cons

• Only available to PayPal sellers
• PayPal loan rates can be expensive
• Low borrowing amounts

What Is PayPal Working Capital?

PayPal Working Capital is a business loan service offered by PayPal, intended to help merchants get capital to grow their businesses. PayPal will loan qualifying business customers (PayPal sellers) an amount of money for a flat fee. It will then collect a percentage of your daily PayPal transactions until the loan and fee are paid back.

These PayPal small business loans are originated by WebBank.

Services Offered By PayPal Working Capital

PayPal offers short-term business loans. However, PayPal’s business loans differ slightly from standard short-term loans.

In practice, PayPal’s financing product resembles a merchant cash advance, though, technically, it’s a loan (not a sale of future receivables). When you get a loan from PayPal, you are charged a one-time fixed fee. Repayments of the loan and fee are made through a daily deduction of a percentage of your PayPal sales.

This type of lending can be a great option for certain businesses but isn’t a fit for everyone, which is why we gave this section a 2.7/5 star rating. The lack of a mobile app also brought PayPal’s score down here.

PayPal Working Capital Borrower Qualifications

PayPal does not require a minimum credit score as part of its PayPal Working Capital requirements, nor does it check your credit history, making it a great lending option for small businesses.

However, you need to have a PayPal Premier or Business account that’s at least 90 days old and be processing at least $15,000/year (Business accounts) or $20,000 year (Premier accounts). Additionally, you must pay off any existing PayPal Working Capital loans to apply for a new one.

PayPal Working Capital Interest Rates & Fees

Although you can potentially borrow as much as $200,000 (first-time borrowers) or $300,000 (repeat borrowers), the size of your loan offer depends on your PayPal sales totals and your PayPal account history in general.

PayPal Working Capital previously stated that it will loan you a maximum of 35% of your annual PayPal sales, though this language is no longer on the website.

As for repayments, PayPal Working Capital loans are repaid through a daily deduction of a percentage of your PayPal sales, so they don’t have a specific maturity date. However, to keep you on track, PayPal requires that you pay at least 5% or 10% of your loan every 90 days. The 5% minimum is required for loans that will take 12 months or longer to pay off, while the 10% minimum applies to loans that will be repaid within 12 months. If you are falling behind, you may need to make catch-up payments.

The only fee PayPal charges is a one-time fixed fee, calculated once by multiplying a factor rate (sometimes called a “buy rate”) by the principal. This fee must be repaid along with the principal. Because PayPal does not charge interest (which compounds), your fee will not change regardless of how long you take to repay the loan.

Sadly, Paypal removed the loan calculator it once included on its Working Capital page. Based on calculations from that tool, PayPal will offer you somewhere between x1.01 - x1.58 times the amount of capital you’re borrowing. In other words, you could pay anywhere between $0.01 and $0.58 in fees for every $1 you borrow. That’s a big spread — excellent at the low end and painful at the high, so make sure you’re picking a repayment plan that won’t cost you a ridiculous sum of money.

Higher fees are directly inverse to the withholding percentage. The less PayPal can deduct from your account each day, the higher your fee. By contrast, the more PayPal is allowed to deduct, the lower your fee.

PayPal Working Capital Application Process

All you have to do to apply for a PayPal Working Capital loan is fill out an application, which you can access via your PayPal account. The application involves verifying your identity, place of business, and some financial information. Typically, PayPal auto-fills this information, and all you have to do is make sure that it’s correct.

You’ll know if you’ve been approved or denied when you’ve completed the application.

If you’re approved, you’ll have the opportunity to choose a loan amount, fee, and withholding rate. After agreeing to the terms, the working capital will be deposited into your account instantly.

PayPal Working Capital Sales & Advertising Transparency

PayPal offers a fairly extensive FAQ about its working capital loans. You should have a very clear idea of how the loan works before applying. That said, the latest version of the company’s website frustratingly dances around providing concise numbers. The loan calculator has also been removed, and the company’s social media channels aren’t very helpful or informative to merchants.

PayPal Working Capital Customer Service & Technical Support

You can reach PayPal via phone (8 AM-8 PM Monday-Friday) or email.

Unfortunately, as many large companies do, PayPal suffers from inconsistent customer service. Working Capital customers are especially susceptible to unhelpful customer service because the loan approval process is completely automated. If you run into problems, customer service may not have a whole lot of helping power.

The good news is that PayPal has a large and very helpful community forum. Any problems you run into have likely been encountered by somebody else, so it’s worth checking out if you’re experiencing difficulties.

PayPal Working Capital User Reviews

PayPal has a page on the Better Business Bureau, though it’s nigh impossible to find any customer reviews specifically regarding the Working Capital service, except on Reddit and other forums. However, PayPal as a whole has relatively positive customer reviews across the board, receiving a 4.1/5 star aggregate customer review rating.

Negative PayPal Working Capital Reviews & Complaints

Here are the most common complaints I gleaned from PayPal’s community forum, PayPal Working Capital reviews, and a few other places on the internet with PayPal business loan reviews:

• Small Borrowing Maximum: PayPal’s previously stated policy had been to offer 35% of your annual PayPal sales. Because many businesses only use PayPal as a secondary source of payments, that number might be a very small amount of their total income.
• Denials: Merchants have reported technical errors or denials, even if PayPal has previously loaned money to their business.
• No Early Repayment Incentive: Because PayPal charges a one-time fixed fee, you cannot save money by repaying early. The only reason to repay early is to get another loan.
• Huge Difference Between High & Low Fees: The spread between PayPal Working Capital’s low and high fees is enormous, making them excellent at the low end and red-flag-worthy at the high. Make sure you’re on the lower end before you accept.

Positive PayPal Working Capital Reviews & Testimonials

PayPal gives you a lot of reasons to like the service it provides.

The company has a few testimonials on its website, and you can find people saying a lot of nice things on PayPal’s community forum, among other places. The consensus of PayPal Working Capital reviews is that customers like this service because of the following:

• Fast Application Process: The application process only takes a few minutes.
• Easy Access To Cash: PayPal is a master at fast cash transfers. The money can be in your account within minutes of accepting a loan offer.
• One-Time Fee: No accruing interest? Sounds like a good deal.
• Inexpensive Fee/Low Effective APRs: PayPal’s fees are often lower than those of its competitors.
• Flexible Fee Structure: The fee structure gives the borrower some control over the deal.
• Hands-Off Repayment Method: Just make sure the money’s in the account. PayPal does the rest.

We’d love to have you contribute to the conversation, though. Have you applied for a PayPal Working Capital loan? What was your experience like? Drop us a comment and let us know all about it!

Final Verdict: Is PayPal Working Capital Worth It?

PayPal Working Capital is a fantastic resource for merchants who use PayPal. The application is fast, the fee structure is flexible and customizable, and repayment is easy. PayPal generally has very reasonable fees, but they have the potential to run high.

Although PayPal Working Capital loans are a bit unusual in structure, they are relatively straightforward, and the website provides enough information about them that you shouldn’t run into any surprises (though we don’t like the fact that PayPal has gotten cagier about disclosing borrowing information). But if you think another funding solution would better fit your business due to poor credit (or no credit), you may want to look into loans for startups with bad credit.

Once again, merchants who are getting denials might want to investigate their other options. However, if you are eligible, PayPal Working Capital is certainly worth including in your comparisons among the best small business loans.

Business Loan & Funding Products Review Methodology

Merchant Maverick has been researching and reviewing business lenders since 2015. Our writers have tested over a hundred different funding products, including traditional term loans, online loans, lines of credit, start-up loans, merchant cash advances, and equipment financing. In each review, we evaluate rates and fees, services, eligibility requirements, application process, sales and advertising transparency, customer service, and user reviews.

Read more about how we rate business loans and funding products.

When comparing different lenders and loan products, we consider many data points, including the ease and transparency of the application process, interest rates, repayment structure, sales ethics, time to funding, revenue and time in business qualifications, and credit score requirements. Our lists of the best funding products include only those we’ve deemed worthwhile from multiple vantage points, and often share qualities such as widespread accessibility across fifty states, low rates, flexible requirements, and competitive borrowing amounts.

We spend an average of 10-15 hours researching and updating each one of our lists, making sure the loans and funding products included meet our internal standards for quality and reputation.

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Explore a wide range of business loan options at BusinessLoans.com. With no minimum credit score requirement, find the perfect funding solution for your needs. Get Started.