PayPal Business Loans

[jeffweico]

Has anyone ever used PayPal Working Capital/Business Loans?

I just started seeing the popups in my business accounts. What caught my attention was the fact that there is no periodic interest due, it is just one fee based on your sales. They claim there is no credit check, so I am curious as to how they can realistically do that with no interest charged - usually interest rates are determined by your credit score.

Now, if this is a loan to a business and you have an actual business, then it MAY be compatible with stealth, although that question would best be left to an attorney.

Anyone have any experience with these?

[Dmshark25]

I have experience getting a loan for a business, not online, and besides all your business information they will need all your personal info as well

Depending on how much you are borrowing I guess , but I built a restaurant, lounge and banquet hall, and there was nothing the Bank did not know about me and my Partner after a year getting the funds, and than there was paper work anytime we needed to use a penny

[jeffweico]

I've used real world business loans in the past, so yes, I am aware of banking requirements. But I am surprised to see PayPal offering loans based on sales history rather than on credit history.

Luckily, I am in a position where I don't need them for operating capital, however it is always nice to know that there is a quick source of funds available should it ever become necessary or if an opportunity comes up that you cannot fund on your own.

[yankee]

I am familiar with this. It is not exactly a loan. They are buying future receivables. It is solely based on transactions. They typically will lend up to 8% of gross annual sales. Fees vary widely

[yankee]

dohardmoney and Kabbage are two others.

[jeffweico]

I also don't suggest that people get into debt to pay operating expenses, or to use this to pay your bills when you are short on money. Credit only works if it is used WISELY. If a seller was being held back because they did not have enough inventory, then a loan may be a WISE decision because it could help your business to grow. But that only works if you KNOW there is demand for your items.

I've hear a few people say they wish they had more money for inventory, because whenever they are out of stock for a few days, they are missing out on sales. THAT is the kind of thing I am talking about. Not a startup venture where you BELIEVE there is a big demand for your gift baskets but have no sales record.

For small businesses, bank loans are hard because they have a high default rate and most banks don't want to deal with them. For larger businesses with positive cash flow and a successful product, bankers are falling all over themselves to hand out money. Usually, for a small business to get a loan the owner has to have PERFECT CREDIT and enough assets for the bank to take in the event of default. Loans based on taking a percentage of future receipts are much easier.

Restaurants are always approached about this, there are SEVERAL companies that will give loans to restaurants that get paid back from credit card processing receipts. The downside is, a restaurant on shaky ground may use the money to keep operations going, rather than for expansion and that just makes their financial situation worse, since a percentage of their sales will be automatically taken to pay back the loan leaving even less money available for operating in the future.

It has been a while since I have taken loans out for anything other than real estate. Even with cars, I'd rather buy a 2 year old car that is still in good shape and has experienced the big part of the drop in it's value. Then I pay cash and drive the car into the ground. That IS getting more difficult to do, however as the market for used cars is fairly robust at the moment. But that will change. Everything does.

[jeffweico]

Originally Posted by yankee

dohardmoney and Kabbage are two others.

DoHardMoney.com is an interesting one. I didn't know about that one. Mentally filed for possible future use.

[Dmshark25]

And PayPal will lend money without asking for an individual's SS#?? I find that hard to believe that anyone will lend money without knowing not only the business but the individuals involved

I know Cabbage asks for a SS#

[yankee]

Originally Posted by Dmshark25

And PayPal will lend money without asking for an individual's SS#?? I find that hard to believe that anyone will lend money without knowing not only the business but the individuals involved

I know Cabbage asks for a SS#

SS is required on paypal.

Now Kabbage is owned by a giant bank. It is no longer futures but a loan. Futures have no personal guaranty. A loan does.

I have sold Kabbage when it was a small company millions of dollars in futures. Made me a slew of money in return. Now, i will not do business with them.

[jeffweico]

Originally Posted by Dmshark25

And PayPal will lend money without asking for an individual's SS#?? I find that hard to believe that anyone will lend money without knowing not only the business but the individuals involved

I know Cabbage asks for a SS#

No, from what I have seen of the screen shots, they need both an EIN and an SSN, or if you don't have a company, then they just need the SSN.

I found this out when researching it online, I found screenshots on Google. But where they ask for that information, they specifically state that no credit report or score will be obtained and that their loans are based solely on your PayPal history.

However, the loans are named by WebBank, so if you have defaulted on them before with any of their programs, you may not get approved. I don't know.

What caught my eye is that there is no interest on the loan. They charge a fee based on the amount of the loan and what percentage you are going to be paying back. When I calculated it, it appeared to be around 4%, which is very good for a business loan.

Edited to add: I don't think it is possible to lend money without an SSN. Ever since 9/11 they have had those "Know Your Customer" rules prohibiting banks and financial institutions from doing business with anyone who cannot be positively identified and the SSN is the easiest way to do that.