PayPal moves into small biz lending

With small businesses in the US still struggling to secure funding from traditional banks, PayPal has entered the field with a new Working Capital service.

Initially available until December to "select" US firms which already process payments through PayPal, Working Capital promises to offer simple, fast and cheap access to loans.

Explaining its move into lending, PayPal cites Federal Reserve Bank of Cleveland figures which show that the total value of small business loans in the fourth quarter of 2012 was 78% less than in the second quarter in 2007.

Merchants can apply online, review and agree to the terms of the business loan and if approved, get funding - issued by lender WeBank - into their PayPal account in minutes.

Recipients repay the loan with a share of their PayPal sales, meaning that there are no minimum monthly payments. The eBay unit also insists that there are no fees.

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Comments: (1)

Enrico Camerinelli - Aite Group - Boston 25 September, 2013, 09:31

1 like

I must say I was expecting this news for some time now. However, as they say, better late than never.

It is a fact that lending is the natural extension of payment services, especially when it comes to small-medium enterprises (SMSs). Well done, PayPal.

I think this will be a threat- in the short-medium term- more to credit card companies than to banks. I have seen some credit card players making steps into supply chain finance (after all that's what we are talking bout here)- e.g., Mastercard, VISA, Amex- with alternate fortunes.

Banks will follow suit down the drain if they don't find a way to properly assess and price the risk of their SME clients.

The solution? My current research on "actuarial tables" for supply chain management makes me believe the answer is there.