Image Credit: PayPal
PayPal’s CEO, Dan Schulman, said in an interview that “every individual has a right to fully participate in the global economy.” They continue to develop a group of innovative financial services that addresses the needs of the poor and people not serviced by traditional financial institutions. PayPal’s acquisition of Xoom, a company that provides international money transfers and bill pay, is an example of their interest in serving people who are left out of the traditional financial system. This target group, the poor and those suffering financial exclusion, is a large market share with very little competition.
Working Capital is a small business loan program. Eligibility is based exclusively on Paypal sales, rather than credit scores. The maximum loan amount is 18% of annual sales or no more than $97,000. They have several systems of payback, including an automatic payment of a set daily percentage of sales, with options to pay manually or pay off early. Loan payoff starts with the first sale after the loan and is handled automatically.
Businesses who process payments through PayPal are eligible if they have had a business account for three months and have processed payments of at least $15,000. A Premier account has a requirement for $20,000 in annual payments. The small business loan program is available in the US, Australia, and the UK.
Paypal doesn’t use credit scores to determine eligibility, and credit scores are not impacted by either the loan or the payback system chosen. Eligibility is determined by an assessment of the business through an evaluation of payments received for goods or services through Paypal.
Working Capital is an innovative microfinance option to grow a small business, even for those excluded from the mainstream.