Merchant cash advances give small businesses access to an added boost of cash quickly. They are often used by those who do not apply for loans from the banks or other big financiers, as businesses are not required to have any assets to use them.
What are the Pros and Cons of Merchant Cash Advances?
There are many pros and cons of merchant cash advances, but here is a quick snapshot into the benefits and downsides of getting a merchant cash advance:
- The finance on offer is flexible and scalable
- The repayment process is simple, and involves minimal input
- You can use more than one line of finance at one time
- The amount you can receive is dependent on your monthly turnover
- They are only applicable for businesses who take payments via a terminal
- Their repayment system only works on certain card terminals
PayPal and Loans
Since its launch in 1998, PayPal has continued to go from strength-to-strength. There have been some competitors that have come close to overtaking it’s success, but PayPal has remained at the forefront of online payments.
According to PayPal’s 2016 report, there are now more than 15 million active vendors using their portal. So it makes sense that they offer their own form of merchant cash advance: PayPal Working Capital Loan.
What is Paypal’s Working Capital Loan?
PayPal first started offering Working Capital Loans to select UK merchants in the autumn of 2014, with country-wide rollout taking place in 2015. This offering was fairly new to the world, having only launched in the States a year earlier. So why did they make the move to the UK?
Cameron McLean, the Managing Director of PayPal UK, explained their reasons, saying:
“Small businesses are the lifeblood of the British economy. But seven years after the start of the credit crunch, many of them are still struggling to get funding. According to the British government, around a third of SMEs rely on retained earnings or the owner’s own finances rather than bank or equity funding. This means that many find it very difficult to finance their present needs or future growth. And the problem is acute for smaller, online businesses. PayPal is well placed to make a difference.”
How Does it Work?
The good news is that PayPal’s working capital loans are straightforward. Here’s how it works:
- First, you choose the amount you’d like to receive. This figure is dependent on your PayPal account and sales stats.
- Next, you chose what percentage of all future PayPal sales will contribute towards repayment of the loan and the fee.
- After these have been decided, you instantly receive the funds from PayPal and have the freedom to use these as you wish.
- You will repay the loan and fee through your future PayPal sales, which will continue until both have been completely repaid.
- Should you wish, you are able to make additional repayments on top of this, at no extra cost.
Are There Any Fees or Charges?
Unlike the more traditional financiers, PayPal has one fixed fee, which will be explained prior to completing your application.
There’s no late fees, no fees for additional repayments, and you’re not required to pay interest on top of the loan and fee amounts.
It is worth noting that the higher your daily repayment percentage is, the lower your fixed fee will be. However, whilst a lower repayment percentage results in a high fee, you also have a degree of more flexibility as you’ll get a larger cut of your sales.
What Makes PayPal a Better Option than the Banks?
In this new era of digital payment, the finance offered by the banks has started to feel more and more rigid, and a much less accessible option - especially for small businesses. PayPal Working Capital makes the process of getting funding for your business simpler and faster.
We’ve created a quick comparison table for you, so you can see how their offering compares to their main competitors:
|Application Process||Five minutes||At least one hour||Around 30 minutes|
|Funding turnaround time||Less than one minute||Up to five weeks||Up to two weeks|
|Repayment Schedule||Percentage per sale||Every month||Every month|
|Fees||One fee only||Yes, including activation fees, annual fees and late payment fees||Yes, including activation fees, annual fees and late payment fees|
|Early Repayment Charge||No||Yes||No|
Am I Eligible?
Though it is easier to apply successfully for PayPal Working Capital, there are some basic requirements that you need to meet in order to qualify. These are:
- You need to have had a Business or Premier PayPal account for a minimum period of three months.
- You need to be registered in the UK.
- If you have a Premier account, you need to process at least £12,000 in PayPal sales each year.
- If you have a Business account, you need to process at least £9,000 in PayPal sales each year.
- You need to have paid off any previous PayPal Working Capital cash advances you have already received.
PayPal will also take the following into account when considering whether to grant you a loan:
- Your PayPal account historyd
- Your business performanced
- Your financial position
They take these into consideration so that they are able to accurately determine the size of the merchant cash advance they can offer you, as well as whether your business is eligible to for PayPal Working Capital.
How Do I Apply?
It’s easy to apply for PayPal Working Capital:
- First you need to head to the working capital section of their website, which you can find here.
- Now you just need to click on ‘Apply Now’ and follow the steps.
- If you have any questions about the process at any point, you can either check through PayPal’s FAQs or give them a call on 0800 368 7173.