To learn more about how a LoanBuilder by PayPal business loan, please continue reading:
LoanBuilder, a PayPal Service, is a small business lending option that provides short-term loans. It is essentially interchangeable with PayPal Business Loans.
However, it shouldn’t be confused with PayPal Working Capital, which works like a merchant cash advance. LoanBuilder, on the other hand, works more like a traditional business term loan.
The repayment structure is just one of the many differences between the two products. LoanBuilder loans are designed for very different businesses and cash flow scenarios compared to PayPal Working Capital.
In this guide, we’ll answer the following questions and more:
LoanBuilder provides short-term loans to small businesses. It originated under the company Swift Financial, which PayPal acquired in 2017. Swift Financial, now a subsidiary of PayPal, services the loan, while WebBank is the financial institution that provides the funding.
The traditional product that most resembles PayPal Business Loans is a business term loan. But instead of monthly payments, borrowers make automatic weekly payments. The lender for LoanBuilder loans is WebBank.
LoanBuilder offers a range of loan amounts to suit different business needs. First-time borrowers can access loans from $5,000 to $100,000, while repeat borrowers may qualify for up to $150,000. This flexibility allows businesses to secure the exact amount of funding they need without over-borrowing. Funds from a LoanBuilder loan are typically transferred to the business bank account as soon as the next business day after approval.
The loan term is also customizable, with repayment periods ranging from 17 weeks to 52 weeks. This allows businesses to choose a term that aligns with their cash flow and repayment capabilities. One of the standout features of LoanBuilder loans is that they are interest-free.
Instead of traditional interest, borrowers pay a single fixed fee known as the Total Loan Fee. This fee is calculated based on the loan amount and the chosen repayment term, providing a clear and upfront cost of borrowing.
LoanBuilder loans operate on a unique fee structure that sets them apart from traditional business loans. Instead of interest rates, LoanBuilder uses a Total Loan Fee, which is a single fixed fee applied to the loan amount. This fee is spread out over the entire duration of the loan, making it easy for businesses to understand the total cost of borrowing from the outset.
There are no late fees, early repayment fees, or processing fees associated with LoanBuilder loans, which adds to the transparency and simplicity of the loan terms. The only additional cost that may be incurred is a $20 Returned Item Fee, which is charged if a payment is returned due to insufficient funds.
LoanBuilder loans offer a range of repayment terms to accommodate different business needs. Borrowers can choose a term from 17 weeks to 52 weeks, allowing for flexibility in managing repayments. The weekly repayments are automatically deducted from the business checking account, ensuring a hassle-free repayment process.
The fixed nature of the loan term means that businesses can plan their finances with certainty, knowing exactly when the loan will be paid off. This predictability is particularly beneficial for managing cash flow and ensuring that the business can meet its financial obligations without unexpected surprises.
The fixed-fee loan structure of LoanBuilder loans provides businesses with a clear and straightforward understanding of the total cost of borrowing. The Total Loan Fee is calculated based on the loan amount and the chosen repayment term, and this fee is spread out over the entire duration of the loan.
This structure eliminates the uncertainty associated with variable interest rates and allows businesses to plan their repayments with confidence. By knowing the exact cost of borrowing upfront, businesses can manage their cash flow more effectively and ensure that they can meet their repayment obligations without strain. LoanBuilder does not charge an upfront fee.
Business eligibility requires at least nine months in operation and a minimum annual revenue of $33,300. To apply for PayPal Business Loans, you will need to supply the following information:
Bank statements are only necessary if you don’t use PayPal to process payments. If you do, this information will already be in PayPal’s system. You may be asked to provide additional financial information.
You can apply for a LoanBuilder loan without using PayPal payments or a PayPal business account. You do need a verified business checking account. LoanBuilder requires a personal guarantee and, previously, a blanket lien.
Potential borrowers must meet the following minimum qualifications:
Loan Builder’s revenue requirement is one of the lowest thresholds for this type of small business loan. For comparison, many fintech companies require $100,000 in annual revenue, while traditional banks often require $200,000+.
Your business’s financial health and personal credit score determine your loan amount, cost, terms, and weekly payment size. LoanBuilder’s eligibility checks do not affect the consumer credit score. If your cash flow shows that you can safely afford weekly payments, you are more likely to be approved for the borrowing amount you’re looking for.
Instead of a standard interest rate, LoanBuilder has a fixed fee, which is factored into weekly payments and automatically deducted from your business bank account or PayPal account (whichever one you use to collect sales). You can choose the day of the week on which payments are deducted.
There are no origination fees or prepayment penalties. However, the full borrowing fee is calculated when you apply. Thus, even if you pay early, you won’t save any money because you’ll have to pay the full fee.
LoanBuilder does not require collateral, but you must sign a personal guarantee. This means that PayPal could potentially seize your personal assets to make up for the lost funds in the event of a default. LoanBuilder reported that it paused repayments during COVID to help businesses not default on their loans.
LoanBuilder loans are reported to business credit bureaus, which helps establish business credit profiles. This means your payment history will affect your business credit score but not your personal credit score.
The LoanBuilder loan application process includes a 5-10 minute online questionnaire. Follow these steps to apply.
To check eligibility for a LoanBuilder loan, you must complete a quick online questionnaire that does not impact your credit score. In the questionnaire, you’ll provide the loan’s purpose, annual revenue, number of full-time employees, industry, and necessary business and personal information.
This will determine if you are pre-qualified. Completing the eligibility questionnaire does not affect your credit. The application process may take longer if your identity cannot be automatically verified.
If you pass the pre-qualification stage, you will be asked to enter your desired borrowing amount and terms. Your selections will determine your fees and the size of your weekly payment.
About five minutes after customizing your loan, you will receive an email from a PayPal representative. This email will either ask for more documents (i.e., bank statements) or contain your loan contract. After approval, you must electronically sign a contract before receiving funds.
If your application is approved by 5 PM ET on bank business days, funds are transferred to your account the next day. Otherwise, it may take a few business days for funds to appear in your account.
PayPal will automatically deduct payments from your business checking account weekly via ACH transfer. If you aren’t sure you’ll have enough money in your account to fulfill a weekly payment, consider changing the day of the week on which PayPal deducts the payment. If your payment is due and your account does not have enough money to make it, you will receive a $20 fee.
You can also contact PayPal’s customer service team about changing your fees or weekly payment size. They may be able to make small changes that make your loan easier to afford.
Repeat customers can often qualify for larger borrowing amounts. Once you’ve paid off your first loan, you can apply and see if you qualify for a larger amount or lower borrowing fee.
With terms of up to 52 weeks, LoanBuilder is considered short-term financing. Most sources of short-term funding typically distribute smaller amounts, i.e., up to $250,000.
LoanBuilder, on the other hand, offers up to $500,000. This makes LoanBuilder ideal for businesses that quickly need large amounts of cash, which is a prevalent scenario in the small business world.
And unlike other short-term lenders, LoanBuilder allows you to customize your borrowing amount and terms. This will enable you to coordinate your loan with your desired investment’s exact cost and time frame.
Many short-term lenders offer just a few options for borrowing amounts and terms (i.e., six months, twelve months, eighteen months). As a result, you could end up borrowing too much or too little.
Despite LoanBuilder’s flexibility with borrowing amounts and terms, there’s no flexibility in the repayment structure. All borrowers must make weekly payments.
When combined with LoanBuilder’s considerably high rates, these payments could put severe pressure on your finances. Other short-term lenders might allow you to choose the repayment frequency most conducive to your cash flow.
Also, even though LoanBuilder doesn’t charge prepayment penalties, there’s no financial incentive to pay off the loan early. Some business lenders don’t calculate your total fee when you apply. Thus, paying early means paying less interest and fees than if you paid on schedule.
LoanBuilder also restricts more industries than most fintech companies. Many online lenders won’t service adult entertainment or gambling businesses, but LoanBuilder has one of the most extended lists of prohibited industries we’ve seen.
Prohibited industries include:
Lastly, LoanBuilder does not report your payments to personal credit bureaus. Though some business lenders prioritize business credit, most emphasize personal credit. For this reason, paying off a loan with LoanBuilder might not increase your chances of accessing better products from other lenders.
Pros:
Cons:
In 2006, a business financing company called Swift Capital created LoanBuilder. About eleven years later, PayPal acquired Swift Capital and began marketing their product as “PayPal Business Loans.”
Some insiders believed PayPal would eventually drop the LoanBuilder brand, but its brand recognition makes that problematic.
But even before the acquisition, LoanBuilder has always been a legitimate business lender. You can visit the LoanBuilder website to read their privacy policy, explaining how they collect and protect your personal information through SSL encryption.
LoanBuilder and PayPal Business Loan are two distinct financing options offered by PayPal, each catering to different business needs. LoanBuilder is a fixed-term loan that provides a lump sum of capital with a single fixed fee, making it ideal for businesses that need a predictable repayment schedule. Borrowers make weekly repayments, which are automatically deducted from their business bank account, providing a straightforward and transparent repayment process.
On the other hand, the PayPal Business Loan is more flexible and is tied directly to your PayPal sales. This type of loan offers short-term working capital based on the volume of PayPal sales processed over the past year. The repayment amount fluctuates with your sales, making it a more dynamic option for businesses with varying cash flow. This flexibility can be particularly beneficial for businesses that experience seasonal fluctuations in revenue.
In summary, while LoanBuilder offers a more structured and predictable repayment plan with a fixed fee, the PayPal Business Loan adapts to your sales, providing a flexible funding solution that grows with your business.
LoanBuilder by PayPal has mostly positive reviews and some negative comments. LoanBuilder is rated “Average” with a score of 3.6 out of 5 on Trustpilot. LoanBuilder has many testimonials available from satisfied customers.
Most users praise the simple application process and fast funding time. Many customers talk about the quality of customer service. LoanBuilder’s customer service team is available Mon-Sat by phone. Customer service is also available via email and social media, but it does not have a chat feature.
The few negative reviews talk about the high cost of borrowing and struggling to make weekly payments. While PayPal does let you change the day your repayment is due, some customers found the repayment structure too rigid.
One customer commented that the agent told them they could save money by paying the loan off early, which isn’t true. Some other negative comments talked about PPP loans, but as those carried complex structures and are no longer offered, that information is no longer relevant.
You will fill out a questionnaire during the pre-qualification stage to check your eligibility. You can also review the estimated offers. These actions will not affect your credit score.
However, if you decide to move forward with the application, PayPal will check your credit. Hence, your credit score might drop during the final stages of the application process.
Instead of a traditional interest rate, LoanBuilder carries a fixed fee of 2.9% to 18.72%. The one-time fee is applied to your loan amount to create the total cost of the loan.
Due to the wide range of terms and borrowing fees, calculating effective APR is difficult. For example, a $100,000 at a 10% borrowing fee and 20-month term would roughly equal a 39.17% APR.
You do not need to use PayPal’s POS service to get a loan from LoanBuilder. You do, however, need an account with PayPal Business.
If LoanBuilder declines your application, you will receive an email explaining what prevented your approval within two days. You can then apply again in 30 days.
A denial from LoanBuilder also doesn’t mean you’ll see the same result with another business lender. For instance, LoanBuilder may have declined your application after determining that your cash flow cannot withstand weekly payments.
Thankfully, plenty of other business lenders offer working capital loans with similar borrowing limits and requirements with different repayment frequencies. You could theoretically access the same borrowing amount but be able to make monthly or even bi-weekly payments. And just like LoanBuilder, the money will appear in your bank account in 24-48 hours.
If you were declined because of poor credit, some bad credit business loan options might be available with other business lenders.
LoanBuilder is an excellent option for businesses that quickly need a substantial amount of cash but cannot qualify for bank loans. However, if your cash flow cannot sustain weekly payments, this repayment structure might limit your capacity for growth.
LoanBuilder isn’t the only business lender that allows you to customize your borrowing amount and terms. If you explore other options, you might find another business lender that offers the main advantages of LoanBuilder but without its most significant disadvantages.
For this reason, we give LoanBuilder a 3.8 out of 5 rating and believe you should only pursue LoanBuilder if it checks every box for your desired investment.
Disclaimer: The LoanBuilder trademark is owned by Swift Financial LLC, a wholly owned subsidiary of PayPal, Inc. and its use herein is for reference purposes only and it does not indicate sponsorship or endorsement from Swift Financial LLC, a wholly owned subsidiary of PayPal, Inc.
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