On Tuesday, PayPal’s small-business lending program has processed roughly a billion dollars in loans within the first two years since its launch and its loan growth has augmented ever since. How PayPal Working Capital works is that they finance companies and businesses the capital they require, but much quicker and simpler compared to old-fashion loans, as well as credit cards. The loan is set at a fixed sum, with payments that grants the user to automatically reimburse the loan with a portion of the business’s daily transactions.
PayPal Working Capital is extending short-term finances which accumulated more than $100 million monthly, mostly towards users who sell on eBay and self-contained small to medium sized vendor, the company said at a payments conference in Las Vegas. PayPal separated from eBay earlier this year, and Chief Executive Officer Dan Schulman has stated he is looking to use PayPal's size to offer affordable financial services widely. Steve Allocca the Vice President & General Manager of Global Credit at PayPal, told Reuters that the biggest challenge for a small business is getting access to credit and about 90 percent of businesses to which PayPal extends credit come back for a repeat loan.
“The reason for the rapid increase in loans comes down to demand. Small businesses simply don’t have great access to capital,” said Darrell Esch the Vice President & General Manager of SMB lending at PayPal. “Small businesses are still down 20 percent from the great recession, this sector hasn’t really bounced back.” Smaller companies just don’t have ability to accumulate loans because banks are very cautious when it comes to lending small businesses money.
PayPal’s system of reimbursement supports and benefits the user overall. PayPal receives a proportion of the merchant’s transaction as compensation each month, a much more reasonable method than asking for a fixed fee. Which means if merchants are doing bad in a given month, PayPal takes less capital.