Could PayPal give the banks a run for their money?

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PayPal has just made an interesting announcement that will be particularly relevant to existing business customers who want to target small firms.

This will be launched in autumn 2014 and it will be the first time PayPal is to enter the UK online loans market, offering working capital to businesses.

PayPal to offer help to struggling SMEs

Naturally, payments will also be open to eBay sellers and these could soon have access to advance merchant cash against their future sales – and it will be interest free!

PayPal have tentatively agreed to limit their first loans to a carefully selected bunch of merchants, but they will become more widely available from 2015. This is fortuitous timing when the Government is clamoring for banks to support small businesses by lending them money more readily.

In fact, a recent report from the Department of Business, Innovation & Skills has shown that access to finance from banking and equity is one of the most significant challenges that most SEMs face.

PayPal has recently been pushing for its products to be made available in bricks and mortar stores, as well as with higher end retailers such as John Lewis. PayPal claims that it can offer the fastest loan approvals for customers, but how can it do this? Well, the company simply draws on their previous sales history. So, the money could be available in less than five minutes!

Interest free?!!

What about the repayments? PayPal will take a percentage of the repayment off of each new sale, so customers won’t find themselves struggling. What is perhaps most interesting, is the fact that PayPal won’t charge any interest fees or charges for late payments! There won’t be any credit checks by third parties. However, the customer will have to pay a fixed fee to sign up to the ‘working capital programme.’

Managing Director of PayPal UK, Cameron McLean, said that small businesses represent the very lifeblood of our economy, yet may are still struggling to find cash funding – and that’s seven years after the banking crisis.

The Government says that a third of all SME owners actually end up using their own finances and retained wages, because it’s now so difficult to get bank funding. This is bad news for future growth!

It looks as though PayPal has found its niche

With so many online micro-businesses cropping up daily, PayPay seems to have cleverly found a niche to fill and it’s well placed to be a real help to British e-commerce.

A similar working capital programme in was launched by PayPal in America last year, it has already provided $140 million in cash advances to SMEs so far.

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