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How Does PayPal Loan Work? Working Capital Loan and Business Loan Details (2024)

Are you tired of your 9 to 5 job and planning to start your own business? Starting a business needs a lot of planning and funds. If you are lacking in funds, do not worry PayPal loan will offer you a business loan without any hassle. PayPal offers two types of loans, PayPal business loans, and PayPal Working Capital Loans. 

These loans are only offered to people who use PayPal service for their transactions. Do you know what is the best part about PayPal loans? You can repay them as per your sales and profits from your small business. So you do not need to worry about the rigid terms of the loan.

In this write-up, we are going to inform you about PayPal loans and their types. We will also tell you about its working, eligibility, and how you can apply for a working capital loan and business loan at PayPal. So if you want to get a loan from PayPal, go through this article.

What is PayPal Loan?

What is PayPal Loan?

PayPal Loan is a loan service offered by PayPal. This service provides small business loans to eligible borrowers who use PayPal for their transactions. The loans are based on the borrower’s PayPal sales history and do not require a credit check or collateral. The loans are repaid through a percentage of the borrower’s PayPal sales and are automatically deducted from the account of the borrower until the loan is paid in full. 

They offer two types of loans, Working Capital loans, and Business loans. If you need a small business loan, you can go with the working capital loan and if you need a bigger loan, you can go with the PayPal business loan. 

Pros

  • Instant funding with same-day deposit. 
  • Your revenue does not need to be too high. 
  • No credit check or collateral is needed. 
  • They offer loans to bad credit holders as well. 
  • Flexible loan repayment terms. 

Cons

  • You need to repay the business loan in weekly installments. 
  • High fees as compared to other business loan services. 
  • The loan repayment term is short. 
  • You can only get one loan at a time from PayPal. 

PayPal Loans Top Features

Now that you know what PayPal loans are, let’s have a look at some of the best features of PayPal loans. These features will help you decide if a PayPal loan is a good option for you or not. Here we go!

1. Quick and Easy Application

Applying for a loan from PayPal is easy and can be done entirely online. The application process is quick and straightforward, and it does not take more than 10 minutes to fill up the entire loan form. Moreover, the borrower can receive funding in as little as one business day.

2. No Collateral or Credit Check Required

PayPal loans do not require collateral or a credit check. This makes them accessible to small businesses that may not have the assets or credit history to secure a traditional loan. PayPal has helped many startups and entrepreneurs start their businesses. 

3. Loan Amount Based on Sales History

The loan amount is based on a merchant’s PayPal sales history, making it easier for businesses to secure funding. This means that if your sales are good, you can easily score a loan of a high amount. 

4. Repayment Based on Sales

The repayment of the loan is based on a percentage of a merchant’s PayPal sales, making it easier for businesses to manage cash flow. This is good in both scenarios, if your business is making a profit, you will get rid of the loan early. Whereas, if your business is facing a loss, you will get extra time to repay the loan. 

4. Flexible Repayment Terms

PayPal Working Capital offers flexible repayment terms, including a choice of daily or weekly payments, to help businesses manage their cash flow. Moreover, you also get to decide your installment amount as per your sales. 

5. No Prepayment Penalties

If you are making a good profit in your business, you are allowed to repay the loan amount early. Merchants are not charged any prepayment penalties if they choose to pay off their loans early.

6. Line of Credit Option

If you are lacking in funds, PayPal loans also offer a small business line of credit, allowing businesses to withdraw funds as needed and only pay interest on the funds that are used. You can repay the rest of the money without paying any interest on it. 

All in all, PayPal loans offer small businesses access to working capital without the traditional barriers of collateral and credit checks. With quick and easy application, flexible repayment terms, and loan amounts based on sales history, PayPal loans are a good option for businesses looking for funding.

PayPal Loans Downfalls

While PayPal loans have the advantage of being quick and easy to obtain, they also have some disadvantages such as higher costs, limited loan amounts, and automatic repayment. Here are some of the disadvantages of PayPal loans:

1. Higher Cost

The cost of a PayPal loan, including the fixed fee and interest, can be higher than traditional loans from banks. If you cannot afford the high fees of PayPal loans, it is better to get a business loan from a bank.

2. Limited Loan Amounts

The loan amounts offered by PayPal Working Capital are typically lower than traditional business loans, which may not be sufficient for larger business needs. If the loan amount is not enough for you, you can get a personal loan or business loan from any other loan-providing service or bank. 

3. Required PayPal Sales

To be eligible for a PayPal loan, a business must process at least $15,000 in PayPal sales annually, which may not be feasible for all businesses. If you do not qualify for this criterion, your loan application would simply be denied by PayPal.

4. Automatic Repayment

The repayment of a PayPal loan is automatically deducted from a merchant’s PayPal account, which may not be ideal for businesses with limited cash flow. To avoid any missed payments, you will need to make sure that there is enough money in your PayPal account. 

5. No Forgiveness or Deferment Options

PayPal loans do not offer forgiveness or deferment options. This means that businesses must continue to make payments even during difficult financial times. If you make any late payments, you will also have to pay the late payment fee.  

6. No Option for Secured Loans

PayPal loans are unsecured, meaning they don’t require collateral, which may not be suitable for businesses that need a larger loan or have assets to secure a loan. Moreover, the interest rate of secured loans is generally low, but since PayPal only offers unsecured loans, the interest rates are over the top. 

PayPal Loans are Best For 

Now let’s see what PayPal loans are best for what kind of people: 

1. Need Instant Funding 

If you are a PayPal merchant and need a business loan instantly then PayPal is the best option for you. In the case of working capital loans, they deposit the loan amount within a few minutes. For business loans, the funding is done within 1 to 2 business days. 

2. Have a Bad Credit Score

If you are a bad credit score holder or have no credit history at all, the doors of most traditional loans like credit unions and banks are closed for you. So it is better to go for an instant PayPal loan because, with a capital working loan, they do not conduct a credit check. 

3. Looking for Flexible Payments 

Are you looking for flexible loan payment terms? If yes then PayPal loans are perfect for you. You can repay the loan as per your sales and profit. Moreover, you do not need to worry about missing the installment because the installment is automatically deducted from your PayPal account on your payment date. 

PayPal Loans are Not Ideal For

PayPal loans might not work for everyone. If you fall under any of the following categories then you should not go for PayPal loans. 

1. Inconsistent Cash Flow 

If you are into a business that makes a profit only in certain seasons or periods or your business has a high risk of loss then PayPal loans might not be a good option for you. Because the automatic transaction of loan installments will continue until you repay the loan completely.  

2. You Use Other Services As Well 

If you use other services as well to send and receive money then a PayPal loan might not be a good option for you. Because in order to get a working capital loan, you need to make an annual sale of at least $15,000 through PayPal. Similarly, to get a business loan, you need to make annual sales of at least $33,300. If your sales are not high, you would only get a small amount of loan which might not be enough for you. 

What Kinds of Loans Does PayPal Offer?

PayPal offers two major kinds of loans: 

  • PayPal Working Capital Loan
  • PayPal Business Loan

1. PayPal Working Capital Loan

This loan is especially for small businesses that have inconsistent cash flow. In order to get this loan from PayPal, you need to have at least 3 months of PayPal history and an annual sale of at least $15,000. If you believe that you just need a small amount of loan to get over the current business loan, a working capital PayPal loan can be a good option for you. 

2. PayPal Business Loan

PayPal business loans are generally large amounts of loans for large businesses. To get this loan, your annual sale should be at least $33,300, and a PayPal history of at least 9 months. You can get a business loan of an amount ranging from $5,000 to $150,000. The preferred credit score for this loan is 560 points or above. 

What is a PayPal Working Capital Loan?

What is a Working Capital Loan?

This is a small business loan offered by PayPal to its merchants who make transactions through PayPal. The loan amount of a Working Capital loan can be $1,000 to $150,000 for first-time borrowers but if you are a repeated borrower, you can get a maximum loan of up to $250,000. The best part about this loan is, there is no minimum required credit because PayPal does not conduct a credit check of your account. 

  • Loan Amount: The minimum loan amount for PayPal Working Capital Loan is $1,000 and the maximum loan amount is $150,000. But if you are a repeated borrower, you can get a maximum loan of up to $250,000.
  • Loan Term: You need to repay this loan within a period of 9 to 12 months depending on your loan amount. Moreover, you need to pay a mandatory installment payment every 3 months. 
  • PayPal History: In order to get this loan, your PayPal history must be 90 days or 3 months. 
  • Annual Sale: You will only qualify for the PayPal Working capital loan if your annual sale is $15,000 with a business account and $20,000 with a premium account.
  • Loan Deposit: This loan comes in the category of instant PayPal loans. The loan amount is deposited into your bank account within the same or the next business day. 
  • Preferred Credit Score: You do not need to have any minimum credit score for this loan. Even if your credit score is bad or you have no credit history at all, you can qualify for this loan. 
  • Interest Rate: PayPal does not charge any interest on its loans. 
  • Loan Fee: The loan fee will depend on certain factors like loan amount, loan repayment period, and your account history. The fee remains the same throughout the loan term. 

Loan Requirements 

Are you planning to get a Working Capital loan from PayPal? Here are some of the eligibility requirements that you will need to qualify in order to get this small business loan. Let’s have a look at the eligibility criteria: 

  • You must be a citizen of the U.S.A. and your age must be 18 years or more. 
  • You need to have your own PayPal account, either Premier or Business, with 3 months of PayPal history. 
  • Annual sales of $15,000 for the PayPal business account and $20,000 for the PayPal premier account.
  • You must have a Social Security Number and a government identification card. 
  • You will also need to provide them with some other personal details like full name, address, contact details, birth date and year, etc. 

Merits 

  • The approval and funding process is really fast. It takes just a few minutes for the loan application to get approved and deposit the loan amount into your bank account. 
  • You can repay the loan early without paying any loan prepayment fee. 
  • You do not need to pay any security fee or attach any collateral. 
  • The loan amount varies from $1,000 to $150,000. 
  • A high loan amount for repeated borrowers. 
  • You can get this loan even with a bad credit score or no credit history at all. 
  • There are no interest charges or extra fees. 

Demerits 

  • You can only get a loan if you have an active PayPal business account. 
  • The loan amount depends on the kind of business you have, PayPal might even deny loan requests for certain kinds of business categories. 
  • You might have to face hard consequences like a limit on your PayPal business account in case of missed loan installment payments. 
  • You need to have a certain annual sale and PayPal history. 

How to Apply for a PayPal Working Capital Loan?

If you are planning to get a PayPal Working Capital loan, make sure that you follow the step-by-step process given below. 

  1. First of all, log in to your PayPal account. 
  2. There you will find an option for loans, click on that tab. 
  3. Now you will be redirected to the loan option. Fill out the loan application with all your details like full name, address, contact details, birth date, social security number, etc. 
  4. After this, enter the loan amount that you want to apply for. 
  5. Select the PayPal scale percentage that you want to go for. 
  6. Send your final application and then wait for the approval. If your loan application is approved, you will receive the funds within 72 hours. 

You can track the progress of your loan application by making a PayPal loan login. 

What is a PayPal Business Loan?

What is a PayPal Business Loan?

The other kind of loan offered by PayPal is a PayPal business loan. They are simply high-amount loans that come with a longer repayment. These loans are offered to large businesses and the loan amount ranges from $5,000 to $100,000 for first-time borrowers which can be up to $150,000 for repeated borrowers. In order to get this loan, your annual sales must be at least $33,300. 

  • Loan Amount: The loan amount for a PayPal Business loan ranges from $5,000 to $100,000. But if you are a repeated borrower, you can get a maximum loan of up to $150,000.
  • Loan Term: The loan repayment period for these loans is 13 to 52 weeks, depending on your loan amount. Also, you need to pay it in the form of weekly installments. 
  • PayPal History: In order to get a business loan from PayPal, you need to have a PayPal history of at least 9 months. 
  • Annual Sale: You will only qualify for this business loan if you have made an annual sale of $33,300 or more. 
  • Loan Deposit: It is an instant PayPal loan. The loan amount is deposited into your bank account within the next business day. 
  • Preferred Credit Score: To get this loan, you need to have a credit score of at least 580 scores or more. PayPal only offers business loans after conducting a complete inquiry of your credit score as well as your credit report. 
  • Interest Rate: PayPal does not charge any interest on its loans but you need to pay a fixed fee for the loan. 
  • Loan Fee: The loan fee depends on your credit score, loan amount, loan repayment period, and your account history. The fee remains the same throughout the loan term. 

Loan Requirements  

In order to get a business loan from PayPal, you will need to pass all their eligibility criteria. Here is the list of all their qualifications. 

  1. Your age must be 18 years old. Also, you need to be a citizen of the U.S.A. 
  2. You need to have a Social security number and government-approved ID. 
  3. Also, the annual sales must be $33,300 or more. 
  4. Your PayPal history must be of at least 9 months. 
  5. There should be no active bankruptcies under your name. 

Merits 

  • This is an instant loan to PayPal. This means that the whole approval and funding process takes a maximum of 72 hours to complete. 
  • You do not need to submit any security deposit or collateral. 
  • You are allowed to repay the loan early without paying any prepayment fee. 
  • The loan repayment is done in easy installments. 

Demerits 

  • You can only apply for this instant PayPal loan if you have an active PayPal business account. 
  • It is not a PayPal small business loan. You will need to have a larger business with an annual sale of at least $33,300, then only you will get this loan. 
  • There are some specific industries that cannot get this loan. 
  • A credit check is done, and you need to have a credit score of at least 580 points. 

How to Apply for a PayPal Business Loan?

If you are planning to apply for the PayPal Business loan, you can follow the procedure given below: 

  1. In order to get an instant PayPal loan for business, first of all, you will need to log in to your PayPal account.
  2. After this, click on the loans tab and then select the PayPal business loan option. 
  3. When the loan application form opens, fill out the form with all your important details like full name, complete address, age, contact details, etc. 
  4. Now you will have to select the loan amount and loan term that you want to apply for. 
  5. Once your loan application is filled, click on the Submit button to send your application. 
  6. Now you just need to wait for their approval. Since you have applied for a business loan, PayPal will conduct an inquiry into your credit score and if your loan application is approved, you will receive the funding within 48 to 72 hours. 

Comparison Between PayPal Working Capital Loan and PayPal Business Loan 

Comparison Between PayPal Working Capital Loan and PayPal Business Loan 

Now that you have all the basic knowledge about the instant loan to PayPal, let’s compare both loans so that you can decide which is better for you. Here we go!

PayPal Working Capital Loan PayPal Business Loan
Loan Amount 
  • $1,000 to $150,000
  • Up to $250,000 for repeat borrowers 
  • $5,000 to $100,000
  • Up to $150,000 for repeat borrowers
Loan Term 
  • 9 to 12 months
  • 13 to 52 weeks
Loan Fee
  • The fee remains the same throughout the loan term. 
  • The same loan fee is there for the entire term of the loan. 
Eligibility Requirements 
  • 90 days PayPal account history
  • U.S. resident
  • 18 years of age
  • 9 months PayPal account history. 
  • The age must be 18 years. 
  • The applicant must be a citizen of the U.S.A.
Loan Deposit Basis
  • The loan deposit depends on your sales. A certain amount of your profit is deducted at every installment until the loan is completely repaid. 
  • Weekly installments are deducted automatically from the sales of the PayPal merchant. 
Loan Repayment 
  • In the form of monthly installments. 
  • In the form of weekly installments. 
Annual Sales
  • $15,000 for the business account
  • $20,000 for the premier account
  • $33,300

PayPal Loan Alternatives 

If you think that PayPal loans are not a good option for you, you can also go with any of the following loan options. 

1. Merchant Cash Advances

Merchant Cash Advances

Merchant Cash Advances also offers business loans to its merchants. But instead of monthly or weekly installments, they automatically deduct an amount from your daily earnings until the loan is completely repaid. But these loans come with high-interest rates, so if you do not get a loan from anywhere else, then only you should seek Merchant Cash Advances for a loan. 

2. SBA Microloans

SBA Microloans

If you are planning to start your own small business and need some funding then SBA Microloans is a good option for you. Here, community-based non-profit lenders offer you loans of up to $50,000 to start your own business. Moreover, you can repay this loan in up to 7 years. 

3. Online Small Business Loans

Online Small Business Loans

There are several online money lenders that offer small business loans to borrowers. The APR can be anywhere between 10{ce71097c8d851159be40394adb7f4bfa15b8239c5072b1a23147a80f6cafd29c} to 100{ce71097c8d851159be40394adb7f4bfa15b8239c5072b1a23147a80f6cafd29c}, depending on your credit score and creditworthiness. But whenever you go for an online lender, make sure that you check their ratings and reviews from their previous customers before applying for the loan. 

Frequently Asked Questions (FAQs)

Q1. Can I borrow money from PayPal?

Yes, you can borrow money from PayPal. PayPal offers two types of loans, Working Capital Loans and Business Loans. The eligibility criteria for both loans are different. Moreover, you can only get an instant loan to PayPal, if you have a PayPal business or premier account with appropriate history and annual sales. 

Q2. How do I request a PayPal loan?

In order to get a loan from PayPal, you need to log in to your PayPal account and then click on the apply for loan option. Once you click on the loan tab and select what kind of loan you want, you will be redirected to the loan application form. Fill out the form with all the necessary details and loan amount and loan term and send the application. If your loan application is approved, you will receive the funding in 1 to 2 business days. 

Q3. Does PayPal do short-term loans?

Yes, PayPal does offer short-term loans. You can get a loan with a minimum loan term of 3 months or 13 weeks. 

Q4. What credit score do you need for a PayPal loan?

It totally depends on the kind of loan you are applying for. If you are applying for Working Capital Loan, you do not need any credit score or credit history because they do not check your credit for this loan. Whereas, if you want to apply for a business loan then your credit score must be 580 points or more. 

Q5. How many PayPal Working Capital loans can you get? 

You can only get one PayPal Working loan at a time. Once you repay the first loan then you can apply for the second loan. Moreover, the maximum loan amount for repeat borrowers is also $250,000. 

Q6. Is PayPal loan instant?

Yes. PayPal loans are instant. For a working capital loan, the funding just takes a few minutes whereas, for business loans, the loan amount is deposited into your account within 1 to 2 business days.

Final Verdict: Is PayPal Loan a Good Option? 

All in all, if you are a PayPal merchant with consistent cash flow then a PayPal loan is a very good option for you. It comes with flexible loan repayment terms and installments. Moreover, you do not need to worry about missing the payments because, on every payment date, the installment amount is automatically deducted from your PayPal account. 

But if your business makes profits only in certain seasons and your cash flow is inconsistent then it is better to go with other loan options. If your credit score is good then you can also go with the traditional loan methods.

Author Profile

Susan Anderson
Meet our Author of Our Editorial Team, Susan Anderson. She is an experienced writer and financial expert who has been writing about credit cards, card offers, services, and other related topics for more than twenty years. With her in-depth knowledge on the matter and her ability to distill complex topics into useful information for readers, Susan has become a go-to source for reliable credit card advice. In addition to her work at the editorial team, she also contributes to major publications such as The Wall Street Journal and CreditCards.com. With her expertise and industry experience, she is able to provide sound advice on all aspects of credit responsibly while helping people save money in the process.

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