Paypal: the newest member of the UK Alternative Finance Lending Market

By AltFi on Wednesday 23 July 2014

Alternative Lending

The UK launch of PayPal Working Capital is set to arrive ten months after the launch of its US lending venture, which has so far lent $140m.

The payments firm has announced today that they are set to start lending to small businesses this autumn. The scheme offers PayPal’s business customers, eBay sellers included, access to an interest-free merchant cash advance against their future sales. This revenue based funding model is similar to those operated by the likes of Liberis and Fleximise whom AltFi News has featured previously. The entrance of a payment goliath (Paypal 2013 revenue was $6.6bn) into this area of SME financing will hopefully serve to increase awareness of alternative finance options by potential borrowers.

The PayPal scheme will initially be available to selected merchants before becoming more widely accessible in 2015. The introduction of the scheme arrives amidst The Treasury Committee’s inquiry into SME lending as The Department of Business, Innovation & Skills reported “SMEs suffer from long-standing challenges in accessing bank and equity finance.”

PayPal’s UK Managing Director Cameron McLean stated:

“According to the British government, around a third of SMEs rely on retained earnings or the owner’s own finances rather than bank or equity funding.”

“This means that many find it very difficult to finance their present needs or future growth.”

“Small businesses are the lifeblood of the British economy. But seven years after the start of the credit crunch, many of them are still struggling to get funding. According to the British government, around a third of SMEs rely on retained earnings or the owner’s own finances rather than bank or equity funding. This means that many find it very difficult to finance their present needs or future growth. And the problem is acute for smaller, online businesses. PayPal is well placed to make a difference.”

The company claims that they will offer faster loan approvals for customers, as PayPal will be able to draw users’ existing sales history. Funds are reported to be available approximately five minutes after application and repayments will be taken as a percentage of new sales, meaning that user reserves will not be affected. Customers will be charged a fixed fee when signing up to the Working Capital Programme - no interest or late fees exist and no external credit checks will be carried out. 

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