PayPal enters small business loans market

PayPay extends its payment processing services with merchant money lending.

The payment giant has decided to try something new, with loans, for small businesses. Selected merchants (about 90 000 on PayPal’s books) can now borrow money from PayPal in what is aimed at a fairly inexpensive and simple process

“PayPal Working Capital” charges one flat fee only (without any periodic interest) and merchants can lend 8% of their yearly PayPal revenue (up to 20 000 USD). The fee will be set by PayPal who then removes 10-30% of the merchant’s receipts until the fee is paid back. In the absence of sales on a given day, no repayment collections will be extracted until further sales occur.

Darrell Esch, PayPal Executive says: “We think this is a very natural extension of the business we operate today…We’re in the business of helping merchants fuel commerce. Strong merchants make a strong PayPal.”