| jeffweico | 06-11-2015 12:52 PM |
Re: PayPal Outreach Business Consultant
PayPal working capital is not a BAD deal, when you compare it with the other small business loans out there, but I would caution everyone to be VERY CAREFUL with these loans. Yes, they are easy to get, but REPAYMENT may not work out the way you think it will.
Once you take the loan, you agree to repay it with PayPal taking a certain percentage of your sales each day. Let's say for this example, you choose the 10% option. What trips people up, is they tend to think of this as 10% of their PROFITS, but it is actually 10% of the GROSS.
Let's say you sell an item for $10. The item costs you $2.50. Shipping is another $2.20. Then, you have eBay and PayPal fees of about $1.30 (the eBay fee varies depending on what you sell). So, it costs you $6 to get the item out the door, leaving you a $4 profit, which means your profit margin is 40%.
Your loan repayment is $1, so your profit drops to $3. In other words, you are sacrificing 25% of your profits to pay back the loan, NOT 10%. Your profit margin is now 30%.
The only way taking this loan makes sense is if you are using it to buy inventory that will increase your sales. This is not a loan that you want to take to pay your bills, or take a vacation, etc.
Having said that, most loans available to small business carry much higher interest rates than PayPal working Capital, so it CAN be a decent option, especially if you are using it to make a deal that you otherwise would not be able to make. My point is, be sure to consider everything CAREFULLY before saying YES. | 
