PayPal's small-business financing unit crosses $1 bn lending milestone

28 October 2015

Paypal's small-business financing unit had crossed $1 billion lending milestone, PayPal CEO Dan Schulman said in a keynote speech at Money 20/20 in Las Vegas yesterday.

For PayPal that represented a doubling of total loan volume since May, with over 60,000 merchants worldwide now having borrowed from it. Loan volume, meanwhile, was on the rise at a rate of $3 million per day, up from $2 million, and continued to accelerate, PayPal's vice president and general manager of SMB lending, Darrell Esch said.

With the rapid expansion of alternative financing, PayPal along with American Express and Square enjoyed an advantage with its captive audience of retail customers.

PayPal entered the small business lending sector two years ago as an add-on for its merchants, many of whom operated stores on eBay, the online auction house that had owned it for over a decade until it was spun off this year.

According to PayPal, one-quarter of its loans last year were disbursed in counties that lost 10 or more bank branches since the financial crisis.

Earlier this year, PayPal hiked its borrowing limits to $85,000 from $65,000, and, at the same time increased the amount a borrower could take on to 15 per cent of sales from 8 per cent.

The idea was that borrowers - in this case, small business owners that relied on PayPal for online orders - could borrow up to 15 per cent of their sales in the past year, up to $85,000. In exchange, PayPal collected 10 per cent to 30 per cent of their daily sales until the loan was paid off.

It however also charged a flat fee, which worked out to roughly 15 per cent to 30 per  cent. As against this the average credit card interest rate, was 15.01 per cent nationally, according to's Weekly Credit Card Rate Report.

According to commentators, the programme pointed to yet another example of the kind of off-beat lending system that had flourished in the aftermath of the financial crisis, as government regulations targeted the big banks that were at the heart of the meltdown.

''Coming out of the Great Recession, our merchants were telling us that access to capital was their biggest problem,'' said Darrell Esch, vice president and general manager of small business lending for PayPal Working Capital.

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