The Tech Invasion of Alternative Lending

PayPal, Amazon and Square: The Tech Invasion of Alternative Lending

Nowadays, it’s easy to run an online business. All you need is a website. Barriers to entry have decreased to a great extent. However, an important consideration should be made before everything – businesses need money to survive.

Before getting paid, you have to make an investment. There are a lot of options that might appeal to you, but you have to choose the option that is best for your small business. Three of the famous credit card options include PayPal, Amazon and Square. In the review below, we compare small business loans, working capital, cash advance, business cash advance, future sales factoring, and small business funding programs provided by these options that can help you make a better decision.

PayPal

Small Business Loan

It provides small business loans through a fast and easy process. To begin the process, the borrower needs to have a PayPal account for 90 days in order to process the payments. After that, the borrower should accept at least $15,000 in PayPal sales within 12 months. Once you get approved, PayPal lends the capital you require. It offers a flexible repaying method, so you can repay the loan with a share of your sales. It asks the borrower to make minimum payments every 90 days.

Working Capital

Its working capital program was opened to its users in 2014. Working capital is provided to the ones who have done enough business with PayPal. It sets a certain percentage through which repayment is done, which gets deducted from the daily sales. The amount of loan the borrower can get depends on the sales their business has done through PayPal.

Cash Advance/Business Advance

When you use your credit or debit card for personal purposes such as sending money for goods and services, PayPal will not charge an advance fee. However, if the user makes a cash advance purchase, PayPal charges a cash advance fee.

When money is sent for services, goods and eBay items (business purposes), PayPal will still not charge a cash advance fee.

Future Sales Factoring and Small Business Funding Programs

PayPal’s working capital financing is only available for PayPal customers. If you need to qualify for a PayPal loan, you should meet certain criteria. If you are a casual seller or non-business, you need to have made at least $20,000 PayPal sales in the past year. However, if you have a business account, the $15,000 PayPal sales are enough to qualify.

The maximum amount of the first loan that you can get is $97,000 which can go up to $125,000 following the later loans. PayPal does not have an interest rate and charges you on the following basis:

• Fixed fee on the volume of your PayPal sales
• Account history
• Amount of the loan
• Percentage of the sales set for repayment

As compared to traditional bank loans, PayPal loans are more expensive. Additionally, if the payments are made on time, other traditional banks will help boost your business, but this is not the case with PayPal.

PayPal working capital seems like a merchant cash advance because PayPal’s repayment method is similar. Merchant cash advance companies also take the repayment amount by taking a daily percentage of the business’ sales.

Amazon

Small Business Loan

Amazon also provides small business loans but after checking the credit history of the borrower and feasibility of the business plan. Businesses are required to sell their products online on Amazon to be qualified for the loan. Based on their performance, Amazon decides whether to give a small business loan or not.

Working Capital

When it comes to working capital, Amazon is in a growth phase. Its main goal is to invest all the funds in the future. Amazon has already made investments in its research and development programs.

Cash Advance/Business Advance

You can use more than one credit card for fund transfers. You’ll have to specify what the payment is for. If you chose the option of cash advance, you’ll be charged a specific cash advance fee by the credit card company. However, Amazon does not charge any cash advance fee for Amazon payments marked as goods or services.

Future Sales Factoring and Small Business Funding Programs

Amazon is known as one of the biggest online retailers, but it is also doing well in the area of small business lending. The borrower can get quick cash to invest in their inventory, and it is believed that almost 50% of borrowers go for a second loan as well.

To qualify for an Amazon loan, you should be an Amazon seller. Once you have fulfilled this condition, you can get loans from $1,000 to $750,000. The rates on the loans are not disclosed by the company. Though repayments are done by a fixed monthly payment, the amount is deducted directly from the borrower’s account.

Business loans provided by Amazon carry higher rates as compared to other traditional banks, but Amazon’s funding time is faster.

Square

Small Business Loan

While it does offer small business lending, Square Capital has offered the entire loan till now through a partnership with the Utah-based Celtic Bank. Currently, Square is planning to offer loans to small businesses without a partner.

Working Capital

You can use Square Capital with ease and simplicity. There are no lengthy application procedures. If you are eligible and get approved, you’ll get the fund the next business day. Total amount owed is fixed, and repayments are made on a specific percentage

Cash Advance/Business Advance

From a merchant cash advance, Square has expanded to a flexible loan. It has done these changes for the betterment and empowerment of its users.

Future Sales Factoring and Small Business Funding Programs

Like PayPal and Amazon, Square’s loan is only available to those small businesses that use its point-of-sale system. Square Capital’s loan offer is as follows:

• Minimum: $500
• Maximum: $100,000

Repayment terms include paying a fixed percentage of your daily credit card sales. The percentage is normally from 9% to 13%.

When it comes to getting a loan, Square is a huge time-saver since there is no hassle. As compared to Square, other traditional banks will offer you better financing rates, although that may take a bit more time. Square Capital’s flexible loan does not offer the option of future financing.