This guest article was written by Meredith Wood, the Head of Content and Editor-in-Chief at Fundera, an online marketplace for small business loans.
When the economy took a hit in 2008, big banks tightened their lending standards—greatly minimizing the loans they approved for small businesses. It didn't take long, however, for the tech industry to see this need, and help make room for new opportunities. In 2016, the 'alternative' lending mark is on an incredible rise.
Among a world of businesses whose sole model is focused on lending to small businesses, a few tech giants have also put their hat in the race. Check out the 3 major tech companies that are lending to small businesses—on top of how they’re already helping small businesses.
1. PayPal
Working capital loans through PayPal are exclusively offered to current PayPal business customers. As long as you’ve been using your account to accept Payments for three months or longer and have processed $20,000 in sales within the past 12 months, you’ll be eligible for a loan.
Since PayPal Working Capital is only available for current customers, they don’t require a credit check. Instead, lenders rely on your PayPal sales history to determine your loan candidacy. This makes the entire process quick and easy. Within minutes you could be approved for a loan and have the money deposited in your PayPal account the very same day.
If approved for a PayPal Working Capital Loan, you can borrow up to 18% of your yearly PayPal sales, meaning of course, the more you earn, the more you’ll be eligible to borrow.
Unfortunately, no matter how much you bring in annually, a PayPal Working Capital Loan won’t exceed $97,000. But the good news is, once you pay it off, you can immediately apply for another loan.
Although there is no set repayment period, you’ll start paying back the loan with a daily percentage of your credit card sales. You’ll pay a flat fee based on your sales history, loan amount, and the percentage of sales you choose to go toward repayment. Reviewers calculate that APRs for the product range from 15% to 30%.
2. Square Capital
With a Square Capital Loan, your eligibility is determined by your processing volume, account history, and payment frequency. Again, this means there is no credit check to determine your loan eligibility, but you must be a current customer.
Receiving your loan deposit through Square isn’t quite as quick as PayPal’s same-day delivery, but their 24-hour turnaround does still get you cash in hand quickly.
Just like PayPal, however, Square takes out a set percentage of your daily credit and debit card sales. So if you have a slow day, you won’t have to struggle to come up with the money for payment—instead, you’ll simply pay less on that particular day.
There are no hidden fees with Square Capital. If you’re offered a loan, you can select the amount and repayment option that works best for you. This means you’ll always know how much you’re going to pay, and the total amount you owe never changes. Reviewers calculate that the average APR for this product is around 35%.
3. Amazon Lending
To qualify for a business loan through Amazon, your inventory needs to be stored in their FBA warehouse, and you must have about a year of sales history. You are essentially borrowing against your inventory and future sales. The caveat, however, is that financing through Amazon is invite-only, so simply having an account with them is not enough to warrant a loan.
If you are offered a loan, you could borrow anywhere from $1,000 to $600,000, with repayment terms between three and six months.
When you need business funds quickly, getting a loan through one of the tech companies we’ve listed is a convenient option. Just remember that most of these companies require you already have an account with them, so if you don’t currently, or don’t plan on getting one, you may be better off going through a more traditional online lender.
