PayPal Working Capital Reviews

General Background About PayPal Working Capital

If you operate an online business, you already know how challenging it can be to get access to the working capital you need to grow your business. Few traditional lenders are willing to make a loan for an online business as they lack specialized knowledge of the industry. There are a growing number of small business loan marketplaces that cater to online businesses although choosing the right lender for your business can still be a challenge.

Many small business owners are now turning to PayPal to help fund their online business. PayPal has been used by online merchants since 1998 with a proven track record as one of the world’s leading online payment systems. The company recently branched out to offer merchants easier access to capital with flat rate loans. This PayPal Working Capital review will help you understand the PayPal Working Capital program, one of the most common online lending programs for merchants.

What Exactly Is PayPal Working Capital?

The PayPal Working Capital program was launched in 2013 amid tight bank credit standards. The program began by offering 90,000 PayPal merchants the chance to borrow up to 8% of their annual PayPal volume up to $20,000 with a fee repaid automatically as a 10-30% deduction of the merchant’s incoming receipts. PayPal began the program by targeting existing customers who already established strong cash flow and opened the program to all PayPal users in 2014.

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Overview of the PayPal Working Capital Program

  • PayPal Working Capital gives business owners fast access to capital that is deposited directly into a PayPal account. PayPal loans do not require a personal guarantee and the loan terms are somewhat flexible as merchants can choose the repayment plan that works best for their cash flow. After being approved for a loan, you will pay a single fixed fee rather than an interest rate. The loan can be funded almost instantly and deposited into your PayPal account.
  • PayPal loans have a single fixed fee based on your loan amount, repayment percentage, and PayPal sales history. You can choose for 10-30% of your sales to go toward repaying your PayPal loan. The lower the withholding amount, the higher the loan fee. For example, on a $8,000 loan, you may pay a total of $949 in loan fees if you choose a 10% withholding amount. Increase withholding to 30% and the loan fees drop to $294.
  • The loan will be repaid automatically as a percentage of sales. Whenever payment is deposited into your PayPal account, a specific amount will be deducted and credited toward your loan. Payments toward the advance will happen automatically whenever you have sales, but you will not pay anything on days you do not have sales. You can reapply for another PayPal loan once the balance is paid in full.

Details On PayPal Working Credit Offerings

$1,000 to $85,000 loans. Advances are capped at 15% of your annual PayPal sales.
Term is usually less than 12 months
Factor rate of 1.02 to 1.13
10% to 30% withholding rate
APR of 15% to 30%
Minimum payment is required every 90 days
Must continue to use PayPal until advance and fee is paid in full

PayPal Working Capital vs. Merchant Cash Advances

PayPal Working Capital (PPWC) loans work like traditional merchant cash advances in many ways. There are a few differences to be aware of, however. Many businesses, even online merchants, use PayPal as a secondary payment method. This means receipts into a PayPal account are not always reliable. For the first 18 months of the loan, you will need to have paid a minimum of 10% of the advance and fee back every 90 days. If this does not happen, the remaining balance will be due at the 90-day mark.

Because a PayPal advance is tied to your PayPal account, you are required to continue using PayPal. If you stop processing payments through PayPal or raise suspicions that you are avoiding paying the advance, PayPal has the right to impose restrictions on your PayPal account until the advance and fees are paid as a lump sum.

PayPal Payday Advance Loan Vs. PayPal Working Capital (credit) Loan

If you conduct business online, you are probably familiar with PayPal. You may accept some or all of your business payments through the site. From time to time, online merchants need some extra cash to cover operational expenses or to expand their inventory. A loan is a safer way to come up with the funds rather than putting off bills or trying to restructure current financial obligations. An instant PayPal cash loan may be the answer.

When you search online for an instant PayPal cash loan, you will see two main options. The first and worst option is a cash advance loan, and the second and better option is a working capital loan that is based on your PayPal business income.A payday business loan that is based on your PayPal income is not an ideal option. It may sound great to be able to get money quickly without a credit check. However, you wind up paying much more than what you actually borrow. If you are struggling to get through a dry spell in sales that you know will end at a certain point in the near future, it may sound tempting to take this easy but expensive option.

The problem is that you will still be paying so much in interest and fees that it will impact your bottom line and strain you financially even when the dry spell is over. Imagine a worst-case scenario where the dry spell does not end or sales do not increase as much as they should. You will now be drowning in debt, your credit will suffer and you will have a hard time finding the funds to get out of this new financial pit.

The better option for a PayPal instant cash loan is a working capital loan. With this type of funding, your payments are aligned with your income. Since payday business loans must be repaid in specific amounts regardless of your monthly, weekly or daily income, they are difficult to repay when you have slow days or weeks. Working capital loan payments are based on the amount of money brought in every day. If you do not make much for a few months, your payments are lower. When you start making more after a dry spell ends, your payments increase to match your increased income.

Understanding Paypal Working Capital Fees

Prospective borrowers should carefully weigh the financial advantages and disadvantages of using Paypal working capital because the service uses a unique fee structure. With ordinary loans, borrowers usually pay nothing upfront unless a down payment is required. Banks also ordinarily impose a lending fee, and this is almost always charged by adding it to the outstanding principal balance on the account. The lending fee is added to the borrower’s account in addition to regular interest charges and other fees associated with a loan. Unlike traditional banking services, Paypal charges no interest on outstanding balances. The difference, however, is that Paypal charges a single fixed fee instead of ordinary interest.  You probably like the idea of not having to pay interest, but Paypal’s fee structure can actually be more expensive in some situations. With ordinary revolving credit accounts, businesses normally do not have to pay a fee that is proportional to the amount borrowed. Instead, a fixed fee is usually charged to open the account, and this fee is usually very low. With Paypal, however, lending fees increase as borrowers raise the amount that they borrow. Furthermore, Paypal does not offer any discounts for early repayment. Borrowers with access to credit, therefore, can sometimes save a significant amount of money on short-term borrowing through traditional credit services. In contrast, borrowers who plan to maintain an outstanding credit balance for several months can often save money by paying Paypal’s fees instead of high interest rates.  The advantage of Paypal’s fixed fees, however, is that the initial fee really does cover all costs associated with the loan. There are no late fees for failing to make a monthly payment, and Paypal does not charge an early repayment fee. Furthermore, Paypal does not vary its fee structure based on a borrower’s credit, so money can sometimes be saved through a lower interest rate at a traditional financial institution. However, it is critical for borrowers to carefully consider their own situation and needs before taking out a Paypal working credit loan. Depending on your circumstances, Paypal’s fees can vary on a sliding scale from approximately 3 to 20 percent of a loan’s principal balance. Due to such high variation in Paypal’s fee structure, borrowers have to fill out Paypal’s online application to know exactly how high financing fees associated with this service will be.

Effective Interest Rates with Paypal

Traditional creditors ordinarily charge interest, and this is usually computed as an annual percentage rate. While Paypal working capital does not have an interest rate, its fee structure means that it has an effective APR. Since Paypal is required to estimate and disclose its APR under federal law, this provider has devised a method of calculating its APR in the absence of interest. The stated APR value is found by first taking the inverse of the average percentage of a year that businesses ordinarily take to pay back their Paypal working capital loan, then multiplying this value by Paypal’s fixed fee as a percentage of the loan’s principal balance. In most instances, therefore, Paypal’s effective APR ends up being between 15 and 30 percent.  Due to the relatively subjective way that Paypal calculates the APR of its loans, borrowers must use their own judgement to determine the true costs they will have to pay. Paypal working credit loans that are held for a longer period of time have a lower effective interest rate than the stated APR. Likewise, loans that are repaid in a very short period of time, such as one month, have a much higher rate of effective interest. Understanding how Paypal calculates the cost of its loans is critical for borrowers because this information can be used to determine whether a Paypal working credit loan is less expensive than an ordinary loan. Paypal varies its APR depending on a borrower’s history and the percentage of sales that a borrower is willing to commit for repayment. Borrowers can view their effective APR before taking out a loan by signing up for the program on Paypal’s website.

PayPal Working Capital Application & Approval Process

Many merchants report technical problems with the PayPal loan process, even two years after its launch. Assuming you don’t run into issues, the application itself will take a few minutes. Before starting the application process, make sure you meet the basic qualification guidelines:

  • Your PayPal Business account is at least 90 days old
  • You have processed at least $20,000 to $1 million in the last 12 months through your PayPal account

You can apply for a PayPal Working Capital loan through your PayPal account. This application will require verifying your identity, business, and certain financial information. The loan process is automated and you will be notified if you are approved or denied within minutes.

If you are approved for a PayPal loan, you can choose the loan amount, factor rate, and withholding rate. The lower the factor rate and withholding rate, the higher your loan fees will be.

There are several reasons merchants may be denied for a PayPal loan. Along with technical errors — in which case you will need to work with customer support or try reapplying with the same information a few days later — you may be denied due to:

  • Poor eBay seller rating
  • History of chargebacks or too many chargebacks on your account
  • Active PayPal disputes
  • Holds on your PayPal account
  • Seasonal sales fluctuations
  • Advantages of PayPal Working Capital

PayPal Working Capital Comparison Chart

Advantages of PayPal Working Capital

While the PPWC program isn’t perfect, it does have several advantages in its favor:

Fast Application Process

When it works properly, the PayPal Working Capital application process takes no more than a few minutes.

Flat Fees

PayPal charges transparent fees with no accruing interest. This makes it easy for merchants to determine exactly how much the loan will cost.

Fast Access to Capital

Unlike ACH payments, which can take days, PayPal cash transfers are instant. You can have access to working capital on the same business day.

Competitive Fees

While PayPal loan fees are high compared to traditional bank loans, they are competitive compared to other alternative loans and merchant cash advances.

Flexible Payment Options

PayPal offers flexible payments that adjust with your sales. This is similar to other merchant cash advances in that you will not have a monthly loan payment. Instead, 10-30% of every payment you receive will be withdrawn automatically and put toward the loan. You do have the option of choosing your withholding percentage. Payments will be made daily and automatically as you receive sales. There are no payments due on days with no sales.

Drawbacks of PayPal Working Capital

There are several problems with the PPWC program that have been pointed out in many PayPal Working Capital reviews. Before you apply, consider these drawbacks.

Low Borrowing Maximum

A common complaint about PPWC loans is PayPal caps the loan amount at 15% of your annual PayPal sales up to $85,000. This is a problem for many merchants who use PayPal as a secondary payment account as annual PayPal sales may represent a small percentage of a merchant’s total sales.

Poor Customer Service

PayPal service has been criticized for years as being unresponsive and inconsistent. Unfortunately, the same appears to be true for the PayPal Working Capital Program. According to several PayPal Working Capital reviews, many applicants run into problems with inconsistent approvals and technical errors. PayPal does not provide much information about criteria which means it can be hard for merchants to determine if they have been rejected due to system error or a legitimate problem.

It Can Be Easy to Default

You already know that missing a loan payment can put your loan into default. With a PayPal Working Capital loan, it can be far easier to accidentally default than with other loans. While loan payments come out of every PayPal sale you make, these payments must reach a minimum amount (10% of your loan amount with fees) every 90 days. It can be easy for a PayPal loan to go into default if business is slow. Because automatic repayments occur the day after the corresponding sales are processed, you will also need to be careful to keep your PayPal balance higher than the percentage of sales you owe as repayment. Default can result in the balance of your loan becoming due immediately or having backup PayPal funding methods debited for the balance.

Loan Fees Are Highly Variable

There is no way to know exactly what your loan fees will be until you go through the application process and see your offer. Loan fees can vary a great deal as they are calculated on a case-by-case basis based on your loan amount, withholding percentage, and PayPal sales history.

How Hard Is It To Qualify For PayPal Working Capital?

The PayPal Working Capital program does not provide specific criteria as to who can qualify for a merchant cash advance. Still, your loan amount will be determined by your annual sales. You will need a PayPal Business account that is at least 3 months old. Ideally, your account should be at least 1-year-old to show 12 months of sales history as this will be used to determine your loan amount.

In general, only merchants with significant PayPal sales qualify for a PayPal Working Capital loan. You will need to have processed between $20,000 and $1 million in sales through PayPal during the last 12 months to qualify.

Is PayPal Working Capital the Right Choice for Your Business?

If you use PayPal for all or most of your sales and you process at least $20,000 in PayPal sales each year, you may be a good candidate for a PPWC loan. Keep in mind that your loan amount will be based on your PayPal account history and your withholding percentage. PayPal does not consider the type of business you operate, which may be a good thing or a bad thing. PayPal loans are not a good choice for all merchants. It may be a good idea to explore other options if:

  • PayPal sales account for a small percentage of your overall sales
  • Your revenue fluctuates due to seasonal sales
  • Your sales are irregular
  • You use PayPal as a backup payment option
  • You need a loan greater than 10% of your annual revenue

How PayPal Working Capital Stacks Up

Recap On How Working Capital “Works”

To calculate working capital, you subtract your current liabilities from your current assets. If you have any employees, your liabilities also include your payment obligations to them. Every business uses working capital to pay for everyday expenses. This includes everything from ordering supplies to paying monthly fees for an Internet domain and hosting plan to keep an online store running. Many businesses face one or two slow times during the year. This could be summer and spring if you sell items that are more useful in the winter.

If you see a slow period approaching and need money to cover your expenses, a working capital loan solves your problems. Interest is affordable and much lower than a cash advance’s rates. The loan amount is based on your working capital, and your payments are based on your sales volume. If you bring in less, your payments are less. If you bring in more, your payments increase. This gives you an affordable way to repay your loan even when business is slow. You can use a working capital loan when business is good too. If you want to expand but do not have the cash to sacrifice upfront to make that happen, a working capital loan lets you do that and makes your payments affordable.

A Pro’s and Con’s Survey On PayPal Working Capital (Credit)


  • Payments are not due on days with no sales.
  • Payments are made automatically on a daily basis.
  • There is same-day funding.
  • There are no fees for early or extra payments.
  • There are flat fees instead of regular interest.
  • There is no credit check for approval.


  • Higher fees come with lower repayment percentages.
  • Early repayment does not decrease the loan fee.
  • The loan is only based on PayPal income and not on other sources.
  • Ten percent of the loan must be repaid every 90 days to avoid default.
  • Qualification requires significant sales through PayPal.
  • Loan fees vary considerably, and borrowers must apply before learning the fee.

Payment Options for Paypal Working Capital Loans

In addition to providing a unique mode of financing, Paypal also offers flexible payment options to fit the individual needs of borrowers. The first dimension of flexibility comes from the repayment options that borrowers can choose from at the time of loan origination. Although Paypal offers significantly lower fees for borrowers who are willing to commit a higher percentage of sales towards repayment, options are available for as low as a 10 percent withholding rate. Likewise, borrowers who favor minimal fees can contractually commit up to 30 percent of revenues received to repaying their loan. The higher withholding rates can be particularly advantageous for high-margin businesses that can afford to pay down their loan quickly. However, borrowers must carefully consider their own circumstances before assuming that a particular withholding rate is right for them on the simple basis of gross margins.A second dimension of repayment flexibility offered by Paypal is derived from how borrowers can make payments whenever they are willing or able to do so. With ordinary credit lines, borrowers must make regular payments irrespective of their revenues or finances. Paypal, however, only requires borrowers to make payments when revenue is received. Withholding payments are automatically deducted from a borrower’s Paypal account the day after a qualifying deposit is made. If insufficient funds are available, borrowers can make catch-up payments by having a higher amount deducted the next time money is received. Borrowers can also make payments through traditional payment methods, such as a bank transfer.Of course, there are limitations to how borrowers can use catch-up payments, and Paypal imposes minimum revenue requirements to ensure that a loan gets repaid within a reasonable amount of time. Borrowers cannot use catch-up payments in more than half of instances where revenue is received in any given month. Therefore, sufficient funds will ordinarily have to be left in an account at the end of each day to allow Paypal’s automatic payment system to withdrawal the full amounts owed. Moreover, Paypal requires that borrowers receive enough revenue to repay at least 10 percent of their loan balance in any given 90-day period. Borrowers can, however, use supplementary payments to compensate for inadequate revenue.

How Quickly Does Paypal Expect Balances to Be Repaid?

Paypal working credit loans do not have a fixed term because a minimum percentage of revenue is used for repayment. Since revenue levels can vary significantly, Paypal has designed its working capital program to accommodate the reality of market conditions. However, Paypal has to impose some limitations to prevent borrowers from exploiting the flexibility of its loans. The lending agreement states that the full balance of a loan must be repaid within 18 months. Paypal states that the vast majority of its loans are repaid in only a couple of months, and its effective APR rates reflect this reality. Furthermore, borrowers who act in good faith and are willing to work with Paypal can ordinarily get an extension. If an extension is not approved, the remaining balance of the loan will be due immediately at the end of 18 months if the borrower cannot quality for a supplementary credit program. Although this worst-case situation is relatively rare, borrowers who select either the 10 or 15 percent repayment options should plan accordingly to prevent their loan from going into default at the end of the initial 18-month period.

Does Paypal Impose Penalties for Early Repayment?

Ordinary banks often charge expensive fees to repay a loan early. However, since Paypal charges a fixed fee regardless of when your loan is repaid, Paypal has a vested interest in getting its money back as quickly as possible. Therefore, no additional fees are charged for paying your Paypal loan off early. Many borrowers like the fact that they can repay the full principal balance of their loan at any time. Getting a working capital loan out of the way can enable you to focus on long-term growth and reduce operating risks. Furthermore, you can apply for another Paypal working capital loan as soon as you have repaid the full balance of your outstanding loan.

Does Paypal Working Capital Require a Credit Check?

No credit check is required to qualify for a Paypal working capital loan. Since Paypal exclusively uses your Paypal account’s history to determine creditworthiness, you will not have to worry about being turned down if you have bad credit history. Moreover, Paypal does not perform any credit check before approving a loan, so you do not have to worry about how applying for Paypal working capital might affect your credit history or that of your business. The downside of not having a credit check, however, is that Paypal cannot lower your rates if you have excellent credit history. Instead, everyone pays the same rates based on their Paypal account history, and this can be good or bad depending on your personal situation.

How Much Can Be Borrowed?

Paypal allows businesses to borrow up to $85,000, but most businesses only qualify for a smaller loan amount. Since Paypal working capital is structured as a short-term lending service, the provider only offers loans that are small relative to your annual sales. In most cases, Paypal does not lend more than 15 percent of a borrower’s annual sales. You can, however, apply for another loan once your current one has been fully repaid. Paypal also enables businesses to borrow smaller amounts in accordance with their needs. Therefore, if you plan to use Paypal working credit for large purchases, you should probably look elsewhere. Paypal can still, nevertheless, be a good choice for short-term borrowing on a revolving basis.

Does Paypal Require a Personal Guarantee?

Businesses are theoretically supposed to be considered separate entities from their owners, but any business owner who has tried to open a working capital account at a bank will tell you that this is rarely the case. Banks ordinarily require business clients to make a personal guarantee, or assume personal liability for outstanding balances that are unable to be paid by the business. Paypal, in contrast, does not require you to sign your name to working capital loans. Therefore, as long as the proceeds of your Paypal loan are used for business purposes in good faith, you will not be personally liable for outstanding balances if your business declares bankruptcy.Paypal has significantly bargaining power among businesses because there are few alternatives to its service, and many customers prefer to use Paypal exclusively. Therefore, Paypal will impose sanctions on your business’s Paypal account if you fail to abide by the terms of your agreement. Furthermore, Paypal will also impose sanctions on your personal Paypal account and that of other businesses associated with your name. Therefore, while Paypal cannot legally collect outstanding balances outside of your business assets, you should keep in mind that it can still impose significant penalties that can severely impact your ability to perform effectively as an entrepreneur in the modern world.

How Can a Paypal Working Capital Loan Go Into Default?

As unlikely as default might be, the uncertainty of the real business environment requires borrowers to consider the worst contingencies associated with every decision. Paypal working credit loans can go into default if borrowers fail to abide by the terms of their loan. The most common reasons for a Paypal loan going into default are listed below.  Since Paypal is designed to be flexible, its loan officers tend to understand when you need to make changes that could impact activity on your Paypal account. However, they also expect you to get their approval in advance before implementing a change that could be construed as acting in bad faith. You can usually avoid going into default in this way by simply giving Paypal a call.

  • Failing to pay at least 10 percent of the loan’s principal balance within any 90-day period.

  • Having to use catch-up payments to cover the cost of more than 50 percent of automatic withdrawals during a 30-day period.
  • Changing cash flow patterns after taking out a loan that result in a significant drop in revenue.
    Switching merchant services to another provider.

  • Other actions taken in bad faith, such as deferring revenues or enabling automatic sweep

Closing Thoughts On PayPal Working Capital

As an online business owner, you know how hard it can be to find funding. Most lenders don’t work with online businesses because they lack specialized knowledge of various online business models while other lenders, including PayPal, apply the same lending strategy to all merchants. If your PayPal sales do not reflect your total annual revenue or you need a larger loan, the best bet is going with a lender who specializes in lending to small online businesses.

An alternative to PayPal Working Capital is Lendvo. Lendvo specializes in providing loans to online businesses and eBay and Amazon sellers with a unique approach to lending. Lendvo provides loans based on the value of a website and considers many factors during underwriting such as web traffic, search engine rankings, and domain name value. Lendvo does not consider the credit rating of the applicant.

Like PayPal, Lendvo offers fast approvals and flexible loan terms with the ability to customize your loan to fit the needs of your business. Lendvo offers loans of up to $100,000 that are not based on a percentage of your sales through a specific payment processor. Your loan can be backed by assets, cash flow, or a combination of both for more flexibility and a greater chance of receiving the capital you need to grow your business.

While PayPal Working Capital is a good option for online merchants who use PayPal exclusively and require no more than 10% of their annual revenue in working capital, it’s not a good fit for all merchants. Explore other options before you commit to a PayPal loan that may not provide the flexibility and funds your business needs.

Some Additional Resources To Review: