PayPal Working Capital business loans review

Our take on PayPal Working Capital

PayPal Working Capital is designed for customers who need quick emergency funds. Many small business owners can get approved and funded in less than an hour with little or no paperwork and no credit check.

As of November 2023, the company doesn’t disclose fees, but a loan rep told us that the process to determine fees is fully automated, taking into account 200 different factors – with fees starting under $100 and reaching up into the thousands, depending on the situation. But there’s no credit check to see your loan offer with fees included – and you have seven days to accept.

If you need fast funding and meet the minimum requirements, it’s worth checking your offer. But there are likely less-expensive short-term funding options out there — even with a PayPal business loan.

How PayPal Working Capital works

PayPal Working Capital loans work a lot like a merchant cash advance on PayPal sales. It’s essentially an advance on your business’s future revenue based on your annual PayPal sales history. You pay back the loan plus a fixed fee, rather than interest, with a percentage of each sale you make using PayPal.

The difference between PayPal Working Capital and a merchant cash advance is that PayPal requires you to have made total payments equal to 10% of the original loan amount with fees every 90 days – regardless of your PayPal sales volume. However, if you’ve met this 10% threshold by the 90-day mark, you shouldn’t owe anything extra.

Many merchant cash advance companies don’t have this minimum. Its lowest fees are also much lower than what you’d find at a merchant cash advance company, which typically starts at 10 cents per dollar borrowed.

How much can I borrow with PayPal Working Capital?

Your PayPal Working Capital loan amount is based on your PayPal sales volume. First-time borrowers can qualify for up to $150,000 in funding and up to $250,000 is available for repeat borrowers.

However, it’s unclear which sales it considers when calculating your loan amount. Officially, your loan amount should be based on annual sales. But some business owners report being told that while eligibility was based on annual sales, PayPal used the last three months of sales to determine how much they could borrow.

PayPal Working Capital fees and payments

PayPal charges a fixed fee instead of interest. For example, if you qualify for a $5,000 loan with a $500 fee, you total loan balance would be $5,500 that you would then start repaying as a percentage of every PayPal sale. There are no interest charges, late fees, prepayment fees or other fees with PayPal working capital.

When it comes to repayments, you’ll need to pay back a percentage of each PayPal sale you make based on the payback percentage you chose when you set up the loan. For example, if you chose 10%, then you’ll need to repay 10% of every PayPal sale. If you chose 30%, then you’ll need to repay 30% of each PayPal sale.

However, the 90 day-mark is important. Every 90 days, the system looks at how much has been paid, and that amount must be at least 10% of the total loan balance, or $550 using the above example ($5,500 x 10%). So, if the system has only only collected $400 instead of $500, you’ll need to pay an extra $150 by the 90-day deadline.

However, the PayPal rep assured us there is no set payoff date and they don’t report to the credit agencies. But if you foresee having trouble making your 90-day payment, you should contact PayPal to discuss your options.

PayPal working capital loan examples

While PayPal no longer displays fees, here are two examples of what it used to charge on a Working Capital loan based on your loan amount and repayment percentage. It’s likely fees have changed, but the repayment structure is similar.

Example 1: High revenue, low advance amount

Say you had $1 million in annual PayPal revenue and wanted to borrow $10,000.

Here’s how much your loan would cost, depending on the repayment percentage you choose:

This loan costs the equivalent of about a low 0.84% APR if you paid it back at the 30% rate over a year.

Example 2: Low revenue, high advance amount

But say you brought in just $15,000 in annual PayPal sales and needed to borrow $5,200.

Here’s how much your loan would cost:

This loan can cost as much as the equivalent of a 226.4% APR if you paid it back at the 10% repayment rate over a year — or higher if you pay it back in a shorter amount of time.

How PayPal Working Capital compares to other products

Here’s how PayPal Working Capital stands up to two other fast, paperwork-free financing providers.

OnDeck is an online lender that offers short-term business loans and lines of credit, with funding available as soon as the same day in some cases. While its rates are higher than average, it may be cheaper than a PayPal Working Capital loan. But it could be more difficult for some businesses to qualify.

Fora Financial is an online lender that offers merchant cash advances and short-term loans. Its pricing starts a little higher than PayPal’s Working Capital but ends lower. It also could take a little more time to receive your funds.

PayPal Working Capital loans

Go to site

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Loan amount

$1,000 – $250,000

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APR

Fee based

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Loan term

Varies

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Requirements

Have a PayPal Premier or Business account for 3+ months and make $15,000 to $20 million in PayPal sales.

Lendio business loans

★★★★★

Finder rating 4.8 / 5

Go to site

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Loan amount

$1,000 – $5,000,000

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APR

Varies by lender

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Loan term

3 months to 25 years

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Requirements

Operate business in US or Canada for 6 months or more, have a business bank account, minimum 500 personal credit score, at least $20,000 in monthly revenue

Fundible

★★★★★

Finder rating 4.9 / 5

Go to site

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Loan amount

$1,000 – $10,000,000

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APR

Rates start at 1% per month

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Loan term

3 to 60 months

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Requirements

500+ FICO score, $200,000 annual revenue, 6 months in business, most recent business bank statements

How it compares with traditional lenders

PayPal Working Capital loans are likely more expensive than a traditional business loan from a bank. Bank loans have rates of 5.75% to 12% APR — which includes both interest and fees paid over a year. They also tend to have longer terms, usually around three to five years, and monthly repayments.

But traditional lenders often have stricter requirements. If your business has been around for less than three years, isn’t profitable or if you have a low personal credit score, traditional business loans can be tough to get. They can also take weeks or even months to get approved.

That’s what makes PayPal Working Capital a better option in emergencies. And some businesses that chose the highest repayment PayPal percentages (for example, 30%) have received fees equivalent to around 1% APR in the past – so it’s worth seeing what you may qualify for since there’s no hard credit check to do so.

PayPal Working Capital reviews and complaints

On Trustpilot, PayPal gets overwhelmingly negative reviews from tens of thousands of customers, though most are about PayPal’s other services. The few working capital reviews are also mixed. Some customers said they hardly notice the deduction from sales. But many complain they were rejected for a Working Capital loan with little explanation.

And it’s a similar picture on the Better Business Bureau website, with tens of thousands of customers leaving dismal reviews for the company and thousands of formal complaints lodged. Reviews on Consumer Affairs are also negative and share similar sentiments to those on Trustpilot and the BBB site.

Of those who left positive reviews, many report being happy with PayPal’s consumer services, including its purchase protection, and marveled at the number of negative reviews left.

How to qualify

You can qualify for a PayPal Working Capital loan if you meet the following requirements.

• PayPal Premier or PayPal Business account owner for at least 90 days
• At least $15,000 in PayPal Business or $20,000 in PayPal Premier annual sales
• No outstanding PayPal Working Capital debt

PayPal doesn’t check your credit score for its Working Capital loans, so it won’t show up on your credit report if you apply. While PayPal doesn’t specify if it reports to credit bureaus, this type of financing usually stays off your business credit report entirely unless you default on the loan.

How do I get a PayPal Working Capital loan?

You can get a PayPal Working Capital loan by going to the PayPal Working Capital website and logging in to your account. PayPal confirms your information and lets you know if you’re approved.

This process can take a matter of minutes for many users — if you’re approved. But many users report having to apply multiple times before they were approved. And in some cases, it can take as long as seven days to get initial approval.

If you haven’t been approved, the rep told us it’s worth applying again because factors can change quickly. You can review your offer for 7 days before accepting. After you’ve accepted, PayPal deposits the funds into your PayPal account.

Why does PayPal decline Working Capital loan applications?

PayPal rejects Working Capital loan applications for a wide range of reasons. Here are some of the most common error codes applicants receive and what they generally mean, according to PayPal Working Capital users:

• Identification error usually means that PayPal couldn’t verify your information. This can happen if your business recently moved or any of your account information is out of date.
• Error code 646 and 650 usually mean that your sales volume has changed enough to throw off PayPal’s predictions for your business’s annual sales.
• Error code 654 usually indicates abnormalities with your account, such as chargebacks, a negative balance or suspected fraudulent activity.
• Error code 602 usually means that your business falls into an ineligible category. This might include industries that have trouble getting approved loans, such as firearms or adult entertainment.
• Error code 656 means that your business relies too heavily on payments from eBay — which split with PayPal in 2015 and has since partnered with another payment processor.

These error codes aren’t definitive and may not be as helpful as they seem. Several users report getting the same message with different codes. The best way to understand why you were denied is to contact a representative.

What to do if you’re denied

You can take several steps if your PayPal working capital loan was denied.

• Wait three days before reapplying if you just closed a loan. It can take up to 72 hours for PayPal to process your final payment — or up to five business days if you paid off your loan manually using a bank transfer.
• Check your account information to make sure it’s up to date. Sometimes, identification errors can be caused by something as simple as an out-of-date phone number.
• Contact customer service if you’re unsure why you were denied. Some users report getting a more satisfactory answer through this route — though many are left frustrated.
• Reapply as often as you like. Sometimes, it takes a few days or weeks to clear up the error that was keeping you from getting a loan.

Is PayPal Working Capital Worth it?

PayPal Working Capital could be worth it if you rely on PayPal sales and need quick access to funds. And if you need a large loan that your business can repay quickly, it might be one of the cheapest options out there.

But it can be an expensive source of long-term financing — and you aren’t guaranteed to get approved even if you’ve already received multiple working capital loans. If you’re eligible for a term loan from a bank — or even another online lender — you can probably find a better deal with another provider.

More PayPal business loans

PayPal also offers two more business loan products that you might want to consider.

• PayPal business loans are short-term loans from PayPal with weekly repayments with funds deposited directly into your PayPal account.
• LoanBuilder is a PayPal lending service that works a lot like the business loan — but with funds sent to your business’s bank account.

Is PayPal Working Capital legit?

Yes, PayPal Working Capital is a legitimate lending service. It’s part of one of the most widely used payment processors internationally. And it uses SSL encryption to protect your information when you apply or use its website. While it’s had its share of data breaches — standard for a tech company of that size — it typically patches them up within a day.

It issues its loans through WebBank, which is a member of the Federal Deposit Insurance Corporation (FDIC).

Check out our guide to business loans for more options.