What alternatives are there when you have been declined Paypal Working Capital?

It seems that everyone in the world of ecommerce is using PayPal.  It is convenient and affordable and many customers trust them, so clicking through a PayPal button is a lot less scary than filling your credit card details into a website you aren’t that familiar with.  A pay with PayPal option can be found on almost any ‘online shop’ these days.  Even theaters, cinemas and music venues use PayPal as part of their ticket booking process.

But PayPal aren’t just about convenient online payments and they have started offering other financial products besides their usual shopping carts and buy it now buttons.  They have gone into the world of small business financing.

By now you may have heard of something called PayPal Working Capital, but what is this product and how do you use it?  Is it something that your business really needs?  And what should you do if your application was refused?

You’ve applied for an advance on your business sales with PayPal, your ecommerce site has been doing very well this year, but there are a few large investments you need to make and you haven’t quite got enough for it so you decide to go for it and apply.  But, after the agonizing week long wait, your letter from PayPal finally arrives.  You rip it open, secure in the knowledge that they must have approved you, after all, you filled everything in correctly and your PayPal account is nice and healthy and your business has been running smoothly now for several months.  But instead of the cheery “congratulations, we have approved your application and the money will appear in your account within the hour”, you are met with a different sentence entirely.  “Sorry, PayPal Working Capital is not available for your business at present.”

 

YOU HAVE BEEN DECLINED PAYPAL WORKING CAPITAL.

 

It is a very disheartening experience to be turned down for a loan, especially a small business loan that you can easily pay off over a few short months, and it may have left you with a lot of questions.

 

What is PayPal Working Capital?

 

Let us start by answering the question of what PayPal Working Capital actually is as this is important in deciding what you need to do should your PayPal Working Capital application be denied.

PayPal Working Capital is a business loan offered by PayPal through your PayPal business account and is actually what is more commonly known as a merchant cash advance.

PayPal offer you the chance to borrow a set amount against your cleared sales each month in your PayPal account.  Then, you chose the percentage of sales profit you wish for PayPal to take in order to pay back the loan each month and each time you make a sale, PayPal will take that percentage off in payment of your loan.

PayPal does not charge a fluctuating interest fee, nor does it place any interest on the amount you owe that grows the longer you owe it.  Instead they offer a fixed, one time fee that is added on to your loan total and is covered by the amount PayPal takes as pay back each month.

Although PayPal take the repayment out little by little, at the percentage you chose when you first set up the loan, on each qualifying sale, you will not pay anything on the days where you don’t make a sale, nor will you be charged double on the days you do to cover any lost repayment.  All you pay back is the percentage you agreed with PayPal each time you make a sale.

This also means that the more sales you make, the faster you can clear your debt, and as PayPal does not charge a repayment early fee, you can go ahead and clear the debt as quickly as you can make money.

So if it is a merchant cash advance, why not call it that?  Well, traditionally, merchant cash advances are notoriously expensive and as such this tends to price people out of the lending market, and so may small businesses would not even consider looking into it further.  However, PayPal offers fairly affordable rates on it’s Working Capital product, even going as low as 1.01, a very rare rate indeed in the world of short-term financing of small businesses.  And as PayPal bases its decision purely on your PayPal account, it does not impact on your credit rating and won’t appear on your record.

Many financial lenders will run a credit check during their underwriting process but as PayPal keep it all internal, they do not run credit checks on your financial background either.  Which is usually the main pull in favor of PayPal over many other companies as if you have taken risks to fund your business, even to the point of nearly crippling your personal finances, then changes are your credit score is in tatters and you could kiss that business loan goodbye.  So the mere fact that PayPal does not do credit checks might be the only reason that you chose to use PayPal’s product in the first place.

 

But not all financiers do credit checks either.

 

PayPal Working Capital declined

 

The automated payback model is actually a very good idea and is an excellent way of insuring against non repayment of the loan, or taking on more debt than you can handle.  But there is a downside too.  As the amount you can borrow is offset against the sales that you have coming in every month, you need to be earning above a certain limit each month and if you aren’t then your PayPal Working Capital application will be denied.

 

PayPal Working Capital Requirements

 

There are other factors too that PayPal takes into consideration when deciding whether to offer you a loan or not, the age and usage of your PayPal account being two.  Also if you have ever had any disputes on your account, both resolved and unresolved, and because the model relies on processing your application in real time, a decision about your account can change as often as your PayPal balance does, which means that you might be far more likely to be accepted at one hour of the day as opposed to another.  It all depends on the amount of sales income you have in your account at the time PayPal are processing your application and running their decision making software.

 

So it may not always be possible to know whether your application will be successful or not before you get that letter which states clearly “Sorry, PayPal Working Capital is not available for your business at present.”

 

But PayPal requires certain criteria to be met before you even put in an application.  Their minimum requirements state that you have held your PayPal Premier of Business account for at least three months or more.

 

They also have a processing threshold and ask that you process at least £12,000 (or between $20,000 and $20 million if you are a United States customer) if you are a Premier account holder or £9,000 (or between $15,000 and $20 million, again for a United States customer) if you are a Business account holder in eligible PayPal sales annually.

 

PayPal determines an eligible PayPal sale as any sales that have been made through your PayPal Premier or Business account, minus any refunds that you may have issued and excludes all non-business transactions and any money that you have transferred person to person, or you have had transferred to you.  PayPal also disallows any deposits or transactions you make to yourself into your Premier or Business PayPal account.  PayPal does not consider any gambling transactions to be legitimate PayPal sales either.

 

You are also required to have repaid in full any PayPal Working Capital cash advances that you have had previously and that are not connected to this application.

 

So to recap, what PayPal actually want from you is an assurance that you are making upwards of £9,000 (or $15,000 for the United States) per year purely in sales through your PayPal account before you can even consider making an application.

 

PayPal also takes into account any additional information regarding your Business account’s history and your overall business performance.

 

In order to determine the size of the merchant cash advance that they will offer you, PayPal also consider your financial position and will use the information to give you a maximum advance figure, which you then have the option of taking or reducing, depending on your requirements.

 

BUT WHAT DOES PAYPAL OFFER AS PART OF ITS WORKING CAPITAL PACKAGE?

 

Well, aside from the big ‘no credit check’ promise, they are also able to provide you with quick, on the spot finance.  But there are many other lenders that offer financing in a hurry, in some cases often quicker than PayPal can.

 

Even PayPal’s streamlined, automated payback system isn’t exclusive to the PayPal brand.  Many merchant cash advance products are in the position to offer this service also, though not all are as reasonably priced as PayPal.

 

With PayPal Working Capital, PayPal even promises that we will not be charged excess and needless fees such as if you were fortunate enough to be in a position to pay back your loan early.  Many lenders will charge a prepayment penalty should you pay it off early as they will lose out on the extra interest, however, PayPal doesn’t charge any extra fees for repaying the amount earlier than expected.  But that isn’t to say that there aren’t other companies that will offer the same options.

 

PAYPAL WORKING CAPITAL & ALTERNATIVES

 

Having talked at length about PayPal and what its Working Capital product can offer you, it’s now time to start investigating an alternative financial company that offers a similar product.

 

Evergreenfunders.com offers merchant cash advances to rival PayPal’s Working Capital  product but is it as good?

 

WHO ARE EVERGREEN FUNDERS?

 

Since its conception, Evergreen Funders has been a leading light in the field of alternative business financing, and with years of vast experience comes trusted partnerships with a multitude of the most advanced and creative funding companies.

 

Evergreen are able to offer a bespoke service, using their wealth of knowledge and over 40 years experience in merchant lending.

 

Evergreen boasts on its website site that it offers the following payment options:

 

Split Funding

 

This is identical to the automated payment system that PayPal offers.  This option allows you to receive cash in advance of your credit card receipts.  Then a daily percentage of any sales made are automatically deducted from your credit card income until you have repaid your debt.

 

This is a simple repayment method that a lot of people like as the money is repaid before you even see the balance you have available, thus proving the old saying “What you don’t know won’t hurt you” true as you don’t actually ever see the repayment money as it is taken before your balance is displayed to you.  This again is exactly the same as PayPal’s Working Capital product.

 

But what if you don’t have the required amount of credit card sales?

 

Automated Clearing House (ACH) Fixed Amounts

 

This option allows a business low in credit card sales to put their cash flow up against the advance.  Again, very much like PayPal.

 

But what if I want something that PayPal offers, for example no credit checks, that Evergreen hasn’t got listed on it’s website?

 

As the merchant cash advance is a bespoke service, calling to speak to one of their team of experts to see what can be included or excluded from your package.

 

Many companies offer fixed products that either include a lot of useless options that you really don’t need nor want, or they don’t include the useful options that you need.  Then they charge you for the services you haven’t asked for.  But Evergreen seem to understand that no two businesses are alike, therefore no two business loans need to be either.  A standardized, one size fits all small business loan isn’t the solution and Evergreen will help you to put together a package that is suitable for your business.

 

So it would seem then that Evergreen Funders is a good alternative should your Working Capital application be declined by PayPal.