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Defining PayPal
PayPal is an American electronic commerce company formed in March 2020 which facilitates payments between parties via online transfers.
Users can make an account by linking their credit card information which is safely stored in the platform, along with identification and proof of funds are confirmed.
Defining Working Capital
Working Capital, on the other hand, refers to the difference between the current assets of a company such as cash, customers' unpaid bills and inventories of raw materials and finished goods, and the current liabilities such as account payables and debts. Working capital is also known as Net Working Capital(NWC).
It is also a basic measure of a company's liquidity and short term financial health.
What is PayPal Working Capital?
When both these processes are put together, PayPal Working Capital is a business loan for PayPal sellers which is easy to apply to and allows you to access your PayPal account. These loans are repaid and contain a small fee with 10-30% of a businesses daily sales.
PayPal Working Capital is basically meant for business owners who need working capital which are the funds needed to carry out day to day business procedures.
How it Works
PayPal Working Capital offers small business loans to businesses that have a prior history with PayPal itself, which means you cannot have access to the working capital benefits if you are not previously affiliated with PayPal.
A business person can apply to borrow an amount which as mentioned above is about 30% of the last year of PayPal sales. Loans are paid back by selecting a percentage which PayPal automatically deducts from a merchant account each time a sale is made. Based on this, PayPal charges a one time fee along with the loan amount, and the total amount to be repaid is given according to the PayPal business loan plus the fee.
PayPal Working Capital Advantages and Disadvantages
- Quick, No Hassle Application- Applying for a Paypal Working Capital in the UK or USA is a very straightforward process. You can just apply directly from the PayPal account page, and once it has been approved, the transfer of funds will happen almost instantly.
- Cost Issues- However, it isn't always cheap. PayPal charges fees for every dollar you borrow. It may not be an affordable alternative for your business if you end up on the higher end of the spectrum, especially if you are just starting out and new to the whole concept.
- Easy Repayment- After you go through the application process, it can be quite smooth sailing when it comes to deduction of the percentage that has been decided. This happens at the close of each day that the sales are posted to the account. It is automatic and does not require you to set reminders for loan payments.
- Small Loan Amounts- PayPal business loans are generally small loans which have short repayment terms. This means that it does not matter if you are processing a large or small volume of sales on the account, the cost of the loan is limited to a certain amount. Another con is that you cannot have more than one loan at a time.