PayPal Working Capital & Business Loans Review: Pros, Cons & More

Key Takeaways:

  • 💳 Eligibility: Available to businesses using PayPal for transactions. Only businesses with PayPal Business accounts can qualify for funding.
  • 💰 Loan Amounts: Borrow up to 35% of annual PayPal sales, with a maximum of $125,000 for first-time borrowers. Eligible businesses can apply for PayPal Working Capital loans ranging from $1,000 to $150,000 for first-time borrowers.
  • Repayment Terms: Terms extend up to 18 months, with repayments automatically deducted as a percentage of daily PayPal sales. PayPal does not disclose specific repayment terms until after application submission.
  • ⚖️ Pros: Fast approval process, no credit check required, flexible repayment tied to sales volume, and no early repayment fee.
  • ⚠️ Cons: Limited to PayPal users, borrowing limits based on PayPal sales, and not suitable for startups or very small businesses.
  • UCS Rating: We rate PayPal Working Capital & Business Loans a 4.5 out of 5.

To learn more about PayPal Working Capital & Business Loans and decide if it’s right for your needs, please continue reading:

Online payment processor PayPal offers two business financing products: PayPal Working Capital and PayPal Business Loans. Both carry their pros and cons and are surprisingly different from one another.

paypal business loan vs working capital, paypal business loan reviews, paypal working capital loan reviews

In this guide, we’ll explain the main requirements and repayment structure. This will help you decide if either of these products makes sense for your needs and goals.

Specifically, we’ll answer the following common questions:

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    What is PayPal Working Capital?

    paypal, logo, brand

    PayPal Working Capital provides additional working capital to businesses that use PayPal. The program is very similar to a merchant cash advance.

    Borrowers can receive up to 35% of their annual PayPal sales, with a borrowing limit of $150,000 and terms of up to 18 months. The debt is paid off via a percentage of daily sales towards the borrower’s PayPal account. The loan amount is determined based on the borrower’s account history and future sales projections. For repeat borrowers, the maximum amount for a PayPal Working Capital loan can go up to $200,000.

    PayPal Working Capital provides additional working capital to businesses that use PayPal. The program is very similar to a merchant cash advance. Borrowers can receive up to 35% of their annual sales conducted via PayPal, with a borrowing limit of $125,000 and terms of up to 18 months. The debt is paid off via a percentage of daily sales towards the borrower’s PayPal account. Borrowers must adhere to a minimum payment every 90 days.

    What are PayPal Business Loans?

    PayPal also offers business term loans, also known as LoanBuilder, with automatic weekly repayments instead of monthly payments. You can borrow up to $500,000 with terms of up to 52 weeks. PayPal offers small business loans ranging from $5,000 to $500,000 for term loans. Businesses can apply for $5,000 to $500,000 with terms ranging from 13 to 52 weeks for term loans.

    Loanbuilder by Paypal Logo

    Unlike PayPal Working Capital, PayPal Business Loans are not exclusively available to businesses that use PayPal to process payments. In addition, applicants no longer need a PayPal Business Account to apply. PayPal Business Loans do not include early repayment fees, emphasizing the fixed payment structure. PayPal does not require hard credit inquiries to approve business loans; it relies instead on monthly income.

    What Do You Need to Apply for a PayPal Working Capital Loan?

    Contact details, birth dates, and Social Security numbers of primary business owners and managers.

    Otherwise, you only need an account with PayPal Premier or PayPal Business to apply for PayPal Working Capital. If you have an account with one of these services, PayPal already has all the financial information required to apply. This includes your PayPal account history from the past three months.

    Additionally, having an active business PayPal account is crucial to qualify for a PayPal Working Capital loan.

    Other Important Factors for PayPal Working Capital

    You must have a PayPal Premier or PayPal Business account for at least three months. You must process at least $20,000 in annual sales if you have PayPal Premier.

    For PayPal Business, you must process at least $15,000 in annual sales. Borrowers also cannot be currently repaying another existing PayPal Working Capital loan.

    There is no credit check. Making payments will not affect your personal or business credit score.

    PayPal Working Capital loans are currently unavailable to businesses in certain states.

    What Do You Need to Apply for a PayPal Business Loans?

    If you use PayPal to process payments, you do not need to submit any financial records because they will already be in the system. On the other hand, if you do not process payments with PayPal, you must provide four months of business bank statements.

    Depending on your business’s financial health, you may need to provide further financial information. Additionally, you will need to enter information similar to PayPal Working Capital. Only businesses with PayPal Business accounts can qualify for a PayPal Business Loan, emphasizing the importance of having an established membership.

    Other Important Factors for PayPal Business Loans

    To qualify, you must have a PayPal Business account. You do not, however, need to use PayPal to process payments.

    Borrowers must also be in business for nine months and earn at least $42,000 in annual revenue. Unlike PayPal Working Capital, there is a minimum FICO score of 620. Lastly, borrowers cannot have any personal bankruptcies.

    For PayPal Business Loans, You Need to Know That:

    Your borrowing amount, terms, and weekly payment size depend on your business’s overall financial health and your personal credit score. PayPal Business Loans are also known as LoanBuilder.

    Instead of a traditional interest rate, the business loan has a fixed fee that is factored into weekly repayments. These payments will be automatically deducted from your business bank account or PayPal account, depending on which one you use to collect sales. You can choose the day of the week on which payments are deducted.

    • Every day, PayPal automatically collects a percentage of sales that went to your PayPal account the previous day.
    • Your repayment percentage is based on the amount borrowed from your PayPal sales history.
    • Since using PayPal costs money, the repayment percentage is deducted from the net amount of your sales after PayPal takes its usual fee.
    • The repayment percentage varies tremendously from borrower to borrower. The minimum is 10%, and the maximum is 30%.
    • There is one fixed fee that is incorporated into your daily repayment percentage. PayPal charges a fixed fee for Working Capital loans, which makes it difficult to compare with traditional loans that use APR.
    • The daily repayment percentage is fixed, so you always know the percentage of sales deducted.
    • Aside from this fixed fee, there are no other fees, including prepayment and missed payment fees. PayPal does not charge additional fees for its business loans aside from a returned item fee if applicable.
    • There is no early repayment fee, allowing borrowers to pay off their loans at any time without incurring extra charges.
    • The higher the repayment percentage a borrower is willing to accept, the lower the fixed fee.
    • Regardless of your terms and repayment percentage, you must repay at least 5% or 10% of the total amount (including the fixed fee) every 90 days.
    • Borrowers must adhere to a minimum payment every 90 days to maintain their financial obligations.
    • Since the maximum term limit is 18 months, you must pay back the total amount within this time frame, even if your repayment percentage doesn’t put you on schedule to do so.
    • Borrowers do not need to sign a personal guarantee or provide collateral.
    • If you pay off your first loan on time, you can take out additional funding rounds for up to $200,000.
    • The minimum borrowing amount is $1,000.
    • Timely repayments won’t affect your personal or business credit score.

    Collateral is unnecessary, but you must sign a personal guarantee. This means that in the event of a default, PayPal can seize your personal assets to compensate for the lost funds.

    Payments for PayPal Business Loans are reported to the business credit bureaus but not the personal credit bureaus. Your business credit could be just as (if not more) important as your personal credit when applying for loans with some business financing companies.

    How to Apply for PayPal Working Capital:

    Follow these steps to apply for PayPal working capital.

    Step 1: Verify Your Information

    PayPal Working Capital was designed so PayPal users wouldn’t have to go through the trouble of applying for funding somewhere. PayPal users who meet the revenue requirements do not have to create new accounts. Instead, you’ll start by verifying your identity, business location, and basic financial information.

    Step 2: Select Your Funding Amount & Terms

    Next, you’ll be asked to select your borrowing amount and repayment percentage (10%, 15%, 20%, 25%, or 30%). The size of your repayment percentage determines the size of your fixed fee. The loan amount is determined based on your account history and future sales projections.

    After inputting your selections, PayPal will estimate how long it will take to repay the full amount. You will then review the loan terms and your fixed fee.

    Step 3: Accept Offer & Get Funded

    At this point, you can either accept the offer or go back and enter another borrowing amount and repayment percentage.

    Once you accept the offer, PayPal’s partner lender, WebBank, will deposit the funds in your PayPal account in just a few minutes.

    PayPal Working Capital: Post Funding

    Repayments begin 72 hours after funding is distributed. You can also make manual payments or pay the loan in full at any time, as there is no prepayment fee. Additionally, there is no early repayment fee for PayPal Working Capital loans, allowing borrowers to pay off their loans without incurring extra charges.

    Each day’s payments are deducted the following day. If you don’t have enough money in your PayPal account to cover the amount owed on yesterday’s sales, PayPal will take “catch-up payments” from your account until you are caught up. For this reason, your repayment amounts won’t necessarily rise and fall in tandem with your sales like a merchant cash advance.

    PayPal won’t take catch-up repayments that put your balance in the negative. However, if your daily sales drop so low that you’re behind more than 50% of your total amount owed, PayPal may consider your account in default. At this point, PayPal may restrict your account or even demand that you repay the entire loan.

    How To Apply for PayPal Business Loans:

    Step 1: Determine Eligibility

    You can find out if you’re eligible by completing the initial 5-10 minute questionnaire online.

    Step 2: Select Your Funding Amount & Terms

    If you pass the eligibility stage, you will be asked to choose your borrowing amount and terms. Like PayPal Working Capital, entering these numbers will reveal the total cost of the loan. The loan amount is determined based on the borrower’s account history and future sales projections, ensuring that businesses understand how these factors impact their funding and repayment structure. The approval process for a PayPal Business Loan typically provides a decision within minutes. PayPal businesses can customize their loan amount and terms once they are pre-approved.

    PayPal will then check your credit, which may impact your credit score. It’s important to note that filling out the questionnaire will not impact your credit, but choosing your amount and terms will.

    Step 3: Accept Offer & Get Funded

    After accepting the offer, PayPal emails you a contract that permits it to extract weekly payments from your business bank account. Funds will then appear in your account within 24-48 hours.

    PayPal Business Loans: Post Funding

    PayPal will deduct payments from your business bank account weekly via ACH transfer. Though you can change the day of the week on which payments are deducted, you cannot change the frequency. Additionally, PayPal Business Loans do not include early repayment fees, emphasizing the fixed payment structure.

    What are the Advantages of PayPal Working Capital?

    If you use PayPal to process payments, PayPal Working Capital is usually straightforward to qualify for. Theoretically, borrowers don’t have to be in business for over three months. Typical business loan requirements, like credit score and profitability, have zero impact on your application.

    The maximum term limit for PayPal Working Capital is 18 months, classifying it as short-term financing. Compared to the interest rates of traditional short-term business loans, PayPal Working Capital’s fixed fee is low. Additionally, there is no early repayment fee, allowing borrowers to pay off their loans at any time without incurring extra charges.

    Traditional short-term business loans might also have longer applications and take more time to distribute funding. With PayPal Working Capital, you can complete the application and receive funding in minutes.

    What Are the Disadvantages of PayPal Working Capital?

    The main is that it’s only available to PayPal users. If you do not use PayPal to process payments, you cannot qualify for PayPal Working Capital.

    Secondly, regardless of your annual revenue, your first two loans cannot exceed $150,000. Businesses that earn hundreds of thousands of dollars per year would likely access higher borrowing amounts from other companies.

    You won’t save on fees if you pay off the loan early, although there is no early repayment fee for PayPal Working Capital loans. PayPal Working Capital does not report payments to personal or business credit bureaus. Timely payments do nothing for your credit score.

    For those who qualify, the most significant disadvantage is the repayment structure. You must keep enough money in your PayPal account to cover the amount owed on yesterday’s sales. This may be an issue for businesses that usually move money out of their PayPal accounts quickly daily. If you use PayPal’s auto sweep function to send money out automatically, you’ll have to turn that off.

    PayPal Working Capital would be much less risky were it not for the 90-day rule. Even if you’ve met your daily payment obligations thus far, you still might not be on track to pay back at least 5% of the total amount in 90 days. You essentially risk defaulting every 90 days if you don’t track how much you may need to repay on top of what’s covered by your daily sales.

    PayPal Working Capital can easily disrupt your cash flow between the repayment structure and PayPal’s catch-up policy.

    Pros & Cons

    Pros:

    • Lower approval requirements, including time in business.
    • Uses your PayPal info, so it doesn’t require paperwork.
    • Lightning fast approval and funding times.
    • Lower costs compared to other short-term financing structures.
    • No early repayment fee, allowing borrowers to pay off their loans at any time without extra charges.

    Cons:

    • Only available to merchants using PayPal payment processors.
    • Low borrowing amounts, especially for first-time borrowers.
    • Doesn’t report to credit bureaus, so it can’t improve or build credit.
    • Requires frequent repayments.
    • The 90-day rule and catch-up payments can significantly strain cash flow.

    What are the Advantages of PayPal Business Loans?

    The main requirements for PayPal Business Loans are easier to meet than traditional business term loans. For example, many business term loans require a credit score of at least 700. With PayPal Business Loans, your credit score can be as low as 620. The minimum annual revenue requirement is also reasonably low compared to traditional business term loans. Traditional bank loans have stricter requirements compared to alternative financing options, making PayPal Business Loans a more accessible choice for many small businesses.

    And since payments are automatically deducted each week, you don’t have to worry about remembering to make payments on your own. Additionally, PayPal Business Loans do not include early repayment fees, emphasizing the fixed payment structure.

    Lastly, though you must sign a personal guarantee, PayPal Business Loans do not require collateral. This makes PayPal business loans increasingly accessible to smaller businesses or individuals who don’t own expensive assets. PayPal requires a personal guarantee for its business loans without needing physical collateral.

    What are the Disadvantages of PayPal Business Loans?

    While PayPal Business Loans can carry similar terms to a traditional business term loan, the repayment structure differs. Traditional business term loans have monthly payments, whereas PayPal Business Loans automatically deduct payments each week. It’s safe to say that weekly payments could pose more danger to your cash flow than monthly payments.

    Like PayPal Working Capital, there is no benefit to paying off the loan early. You would still have to pay the same amount as if you paid on schedule. Additionally, PayPal Business Loans do not include early repayment fees, emphasizing the fixed payment structure.

    Also, timely payments on business term loans usually raise your personal credit score. PayPal Business Loans only report payments to business credit bureaus, so your payments do nothing for your personal credit.

    And though many business term loans carry personal guarantees, it’s not impossible to find a company that lacks this requirement.

    Pros:

    • Lower approval requirements than traditional loans.
    • Automatic payments reduce the risk of missed or late payments.
    • Does not require collateral.

    Cons:

    • Weekly payments can cause cash flow challenges.
    • No discount or benefit for early repayment.
    • Requires a personal guarantee.

    Apply for business funding through United Capital Source today.

    PayPal Working Capital FAQs

    Does PayPal Report to Credit Bureaus?

    PayPal Working Capital does not report payments to personal or business credit bureaus. On the other hand, PayPal Business Loans reports your payments to business credit bureaus. Timely payments will raise your business credit score but not your personal credit score. Additionally, PayPal Business Loans do not include early repayment fees, emphasizing a fixed payment structure.

    Does PayPal Pull Your Credit During the Application Process?

    There is no credit requirement for PayPal Working Capital, so there is no credit pull during the application process. But PayPal Business Loans has a minimum credit score of 620. It will pull your credit during the application, which may affect your personal credit score.

    Is PayPal Working Capital the Same as a Merchant Cash Advance?

    PayPal Working Capital shares many similarities with merchant cash advances, but it is technically a loan. The main difference is if you don’t have enough money to cover the previous day’s sales, PayPal will take “catch-up payments” from your account until you reach this point

    Can You Change the Percentage of Daily Sales that PayPal Takes for Repayment?

    You cannot change the percentage of daily or weekly sales that PayPal takes to repay both programs.

    What Happens on Days When Your Business Makes No Sales?

    PayPal takes the money based on the previous day’s sales. If there were no sales on the previous day, it wouldn’t process payments, but you’re still subject to “catch-up payments” once you have sales.

    What if PayPal Declines My Working Capital Loan?

    If PayPal rejects your application for a working capital loan, it may be because of volatile cash flow. Specific industries are particularly prone to occasional dips in revenue.

    PayPal Working Capital also relies on a computer algorithm to issue approvals. If the algorithm detects the slightest inconsistency with sales, it may reject your application. Since there’s no human involvement in this process, you can’t even explain the issue.

    Many other business financing companies offer similarly loose requirements as PayPal Working Capital. You don’t need a high credit score to get approved for certain bad credit business loans.

    These companies use human beings, not computer algorithms, to approve loans. Before rejecting your application, you would have a chance to explain the drop in revenue and prove that it doesn’t impact your capacity to repay debt.

    What if PayPal Declines My Business Loan?

    If PayPal rejects your business loan application, it may be because you cannot satisfy the weekly repayment structure. In this case, you may consider other companies that carry similar products as PayPal Business Loans but allow multiple payment frequencies.

    For example, many companies offer business term loans or working capital loans that you can pay back monthly or bi-weekly. These companies also usually have similarly loose requirements, especially regarding credit scores. And just like PayPal, the money will appear in your bank account in 24-48 hours.

    Making Your Decision

    signpost, wood, yes

    PayPal Working Capital loans make sense for businesses that use PayPal to process payments and probably won’t qualify for other options. It’s also a form of short-term financing, so you shouldn’t be looking for a large borrowing amount. Many businesses use working capital for covering expenses or payroll, investing in marketing, or managing cash flow. Additionally, businesses seeking alternative financing options might consider invoice financing, which allows them to borrow money using outstanding invoices as collateral.

    PayPal Business Loans make sense for businesses looking for moderate amounts but cannot qualify for traditional business term loans. It is a good option if you have a low credit score, lower annual revenue, less than a year in business, and you’re looking for options beyond short-term financing. For these reasons, we give PayPal Working Capital a 4.5 out of 5 rating but only suggest using them if you can’t secure better terms.

    Disclaimer: The PayPal trademark is owned by PayPal, Inc. and its use herein is for reference purposes only and it does not indicate sponsorship or endorsement from PayPal, Inc.

    Apply for business funding through United Capital Source today.

    Why Choose United Capital Source?

    Why businesses choose UCS:

    1
    Quick funding options that won’t affect credit
    2
    Access to 75+ lenders with multiple products to choose from
    3
    Financing up to $5 million in as few as 3 days
    4
    1500+ 5 star reviews from happy clients!

    Ready to grow your business? See how much you qualify for:

      Current monthly sales deposit average to your business bank account?

      How much Working Capital would you like for your business?

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        Current monthly sales deposit average to your business bank account?

        How much Working Capital would you like for your business?

        At UCS, we understand the value of your time and want to ensure that your application has a great chance of approval. Please take note of the following details before applying:
        • To be eligible, it’s necessary to have a business bank account with a well-established U.S. bank such as Chase, Wells Fargo, Bank of America, Citibank, or other major banks. Unfortunately, online-based bank accounts like PayPal, Chime, CashApp, etc., are not permitted.
        • When describing your current average monthly sales deposits to your business bank account, please provide accurate information. Our approval process is based on your current business performance, and it’s essential to provide accurate details about your current sales in the first question on the application form. We cannot approve applications based on projected revenues after receiving funding.
        We appreciate your understanding and cooperation in ensuring a smooth and successful application process.
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