PayPal to give small businesses access to funds

25 September 2013

PayPal, the online payments firm, has launched a lending platform that will allow small business owners to apply for access to capital.

Known as PayPal Working Capital, the funding can be approved in minutes and enables businesses to pay back loans based on a fixed percentage of sales, so if no sales are made on a particular day the repayment is zero.

In an interview with entrepreneur.com, Brian Grech, the man in charge of risk management for small business products at PayPal, said merchants are very constrained when it comes to capital.

"In a lot of cases, their next best option would be a personal credit card or a very high-priced merchant cash advance and we expect to displace those overwhelmingly [with the new loan product]," he added.

Borrowers will pay a single fixed fee for the loan so the faster the business repays it, the smaller the fee will be.

The new funding model could be a major rival to banks and lenders and a major help to businesses struggling to acquire funding.

By Claire Archer

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