Earnings Season Shows Merchants Turning to Platforms to Meet Working Capital Needs

Beyond the earnings season focus on consumer spending and consumer lending, the recent quarterly results from the likes of Block, Shopify and PayPal show that merchants are utilizing those same platforms to access capital in an uncertain environment in order to buy inventory and cover other operating costs.

In some cases, there is not much in the way of commentary on lending activity, but digging into the filings can uncover the volumes of loans extended, and how those loans are performing.

PYMNTS Intelligence found earlier this year that as tariffs quickly became a reality, smaller firms without access to financing said that they were much less confident in their ability to adapt to a changing economic environment and are 75% more likely to have no plan to offset any costs arising from the implementation of tariffs.

Growth in Lending Activity

In March, PayPal said that it had passed a cumulative $30 billion in global loan originations for small businesses since launching its first merchant lending solution in 2013.

PayPal’s merchant lending solutions include PayPal Business Loan and PayPal Working Capital.

PYMNTS Intelligence and Visa have found that more than a third of smaller businesses  are “highly interested” in switching to providers that offer embedded lending options.

In PayPal’s first quarter earnings report, the company said that total merchant loans, advances, and interest and fees receivable outstanding, net of participation interest sold, stood at $1.6 billion in the most recent quarter, up 32% from a year ago.

“The increase was due primarily to growth of approximately $230 million in our [PayPal Working Capital] product portfolio, primarily from the U.S., Germany and the U.K., as well as growth of approximately $160 million in our PayPal Business Loans  product in the U.S.,” the company said in the filing. PayPal said delinquency rates improved, as 90+ day delinquencies were 3.2% in the first quarter from 4.4% a year ago.

Alex Chriss, CEO, told analysts on the first quarter earnings call that “we know that cash flow is the most critical part for small businesses,” and though when it comes to tariffs,  “we haven’t seen a big impact yet … as they think about money in, money out and access to capital, we know that we have tremendous strength when it comes to providing capital to our small business customers, and we think we can be a place for them to come in times of need.”

In Shopify’s filings, the company detailed that its loans and merchant cash advances, originated by its banking partner, are bought and held (or sold) by the company. In the three months ending March 31, the company purchased $821 million of loans and merchant cash advances to Shopify merchants up from $587 million loans in the year ago period. The company’s balance sheet noted that merchant loans and cash advances were $1.4 billion in March, up from $1.2 billion at the end of 2024.

Block’s 10-Q filing with the SEC indicated that, with Square Loans, its commercial loans on the company’s balance sheet were $476 million, compared to $404 million at the end of last year.