PayPal Expands SMB Lending Program

It is reported that 25% of small businesses fail within the first year that they open and 50% fail within the first 18 months of opening. Many of these small businesses need additional capital to grow so they can compete in the cut throat market. PayPal Working Capital has helped small businesses with funding and recently announced their pilot program was successful and announced plans to expand further.

Since launching the pilot for PayPal Working Capital in September 2013, PayPal has been helping to fill a need for capital. According to the Federal Reserve Bank of Cleveland, the total value of small business loans in the fourth quarter of 2012 was 78 percent less than in the second quarter in 2007.


The program was made available to select businesses that already process payments with PayPal with the loans issued through WebBank. The loan is available for a single, fixed fee that is displayed to a business before signing up. There are no periodic interest charges, late fees, pre-payment fees, or any other fees, so a merchant knows exactly what they’ll pay. With the program WebBank uses PayPal sales history to extend credit, so no credit check is required and the loan does not affect a business’s credit score. Loan balances are repaid using a share of their sales, with no fixed payment dates to remember and no monthly minimums.


Steve Contratto, owner of CF Sales, a company that sells Logitech computer accessories on eBay says that he “decided to apply for PayPal working capital after seeing how hard it would be to get a traditional bank loan, it just became a headache, to where we decided to just drop out and not even try”.


PayPal reports that they have received strong feedback from those who participated in the pilot program and 90% of their customers gave them a 9 or 10 (on a scale of 0-10) on their likelihood to recommend PayPal Working Capital to other merchants.


Contratto, reports that he  was able to leverage his $20,000 PayPal Working Capital loan to purchase inventory, which he turned into $40,000 in sales, growing his business by 40 percent for that month.