Working capital is the lifeblood of small business and payments firms have been actively responding to this growing need.
Both Square and Stripe use payment transaction data to determine creditworthiness and payback ability of their small business clients. Additionally, PayPal offers lower end loans to its business account base as well.
So it’s no surprise that PayPal is now making its loan product available in Canada. Watch for more fintechs and alternative lenders to continue to cater to small business owners, and take market share away from the traditional commercial banker down the street.
A BetaKit article, excerpted below, covers the topic further:
PayPal has announced it is now offering loans ranging between $5,000 and $100,000 to select small business owners in Canada. The new loan offering is currently only being offered to a select group of PayPal merchants.
The company is trying to simplify the loan process through a quick application process that can approve an applicant in minutes and transfer funds in one to two business days. The loans are being made out for business owners looking to buy inventory, invest in equipment, expand products or locations, or manage cash flow, though the loans are not limited to those uses alone.
“Applying for a traditional loan takes time and isn’t always favorable to small business owners,” said Paul Parisi, president of PayPal Canada. “We’re launching the PayPal Business Loan to offer our merchants easy access to financing, something they desperately need. We look forward to helping more small business owners achieve their dreams to grow locally and globally.”
PayPal said merchants who have taken one of its business loans in the US experienced an average growth of 21 percent, and 88 percent of those businesses reported seeing a revenue boost in the first three months after accepting the loan. The most common uses of the loans include managing cash-flow (44 percent), purchasing inventory (37 percent) and investing in marketing (31 percent). The Silicon Valley company added the new loan for Canadian businesses has no origination fees, late payment fees, early repayment fees, or application fees.
Overview by Raymond Pucci, Director, Merchant Services at Mercator Advisory Group