If you’re an existing PayPal business account user or you’re considering using it for your online ventures, PayPal Working Capital is a finance solution to consider. It helps companies get fast access to funds for operational needs and ease cash flow pressure.

We outline what it’s used for, how it works and the key benefits to help you understand whether it’s a good option for your business.  

What is PayPal Working Capital?

PayPal Working Capital is a type of alternative business funding that provides companies with quick access to capital with flexible repayments based on future PayPal sales. It’s suitable for existing PayPal users who need an advance of working capital to use for everyday expenses, investing in new stock and initiatives or to keep operations running smoothly.

If you’ve historically used PayPal to collect payments from customers, it can be a good solution to manage cash flow with a finance solution that aligns with your revenue.

How does PayPal Working Capital work?

It’s a business cash advance (or merchant cash advance), where users can repay the capital they borrow as the business earns money. PayPal automatically collects repayments based on the sales performance in your PayPal account.

How much you can borrow depends on your PayPal account history. You’ll agree on a percentage of sales that will go towards repaying the amount and the service fee, which varies based on the amount borrowed and your PayPal sales history. 

A minimum payment is required every 90 days. Repayments can be done automatically or manually until the full amount is repaid, with early repayments possible for no additional charge.

Once approved for PayPal Working Capital, funding will be transferred to your account in minutes, giving you fast access to funds to support your business needs.

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Here’s a hypothetical example: If your agreed repayment rate is 25% and the business earns £10,000 in PayPal sales, then you’ll pay back £2,500 in this given month. If sales drop to £8,000 in the next month, your next repayment would drop to £2,000.

What can I use PayPal Working Capital for?

The purpose of this working capital finance solution is to allow for sales fluctuations and plug cash flow gaps, with minimal pressure from the working capital credit offered, as it’s aligned with your business performance.

The main reasons you might need to use PayPal Working Capital are:

• Seasonality – ensure you have enough working capital, as your revenue and demand fluctuate
• Avoiding supply-chain issues and bottlenecks if you run into cash flow problems 
• Supporting growth and fueling expansion plans
• Significant outgoings, such as staffing and asset purchases, have left you short on available capital for everyday expenses

You can use PayPal Working Capital for various uses, such as:

• Purchasing inventory to avoid stockouts or missed opportunities 
• Boosting promotional efforts, especially during busy periods/seasonal events
• Purchase new equipment or upgrade tech solutions
• Expand your product range and fund new growth initiatives
• Cover key liabilities, such as tax bills and other outgoings

How much can you borrow with PayPal Working Capital?

The amount you can borrow will depend on your specific circumstances, including your PayPal sales history, creditworthiness, plus other key factors. PayPal offers working capital loans (as a cash advance) ranging from £1,000 to £160,000 for first-time applicants. However, further applications can unlock up to £225,000, again depending on your situation, usage and sales performance.

What are the eligibility requirements of PayPal Working Capital?

There are several requirements you’ll need to meet when applying for PayPal Working Capital. Here are the key eligibility criteria:

• You’ve used a PayPal Business account for at least three months
• Your business is registered in the UK (unless you’re a sole trader)
• You must process at least £9,000 annually in PayPal sales
• Any existing cash advances used via PayPal must be repaid

Here are the full PayPal Working Capital terms.

PayPal Working Capital rates

PayPal doesn’t add interest to the repayments. Instead, charging a fixed fee depending on the size of the loan and your PayPal sales and account history. It also depends on the repayment percentage selected. This will be outlined before you complete your PayPal Working Capital application.

Once agreed, you’ll know exactly how much (as a percentage of future sales) you’ll repay each month, as the rate is fixed and the repayment percentage pre-agreed.

How to apply for PayPal Working Capital

To apply for PayPal Working Capital, you’ll need to be a business owner with a PayPal account. So, if you’re not, you’ll need to sign up and start building sales through the account until you’re eligible for working capital loans.

If you have an existing account, you can login and start an application. The whole process should take around five minutes, and you’ll know if PayPal has approved you for the finance within a matter of seconds, thanks to historical data.

PayPal Working Capital FAQs

Do I need a PayPal account to apply for this loan?

Yes, must be a business owner with a PayPal Business account for 90 days or more to apply. Plus, you’ll also need to process yearly PayPal sales of at least £9,000.

How long does it take to get the funds once approved?

It’s a smooth process, with PayPal transferring the funds to your account within minutes of approval.

What fees are associated with this loan?

You’ll pay a fixed fee to PayPal Working Capital, which they’ll explain to you before you complete your application. You’ll need to repay a percentage of your PayPal sales each month. The repayment amount varies depending on the size of the loan and your business credit score.

Can I use the funds for any purpose?

No, you can only use the funds for business purposes. This could include inventory, marketing, or expanding your business.

When do automatic repayments begin?

Payments will start 72 hours after you receive your loan.

A business loan as an alternative to PayPal Working Capital

PayPal Working Capital is only suitable for businesses that have a history of trading on their website. So, if you’re an established business but haven’t processed over £9,000 in PayPal sales annually, then you won’t be eligible for this type of working capital loan.

As repayments are influenced by the number of sales made directly on the platform, you’d also need to carefully consider future sales and the impact these would have on your repayment plans.

Other revenue-based finance

If you’re keen on the revenue-based finance model, you can get a merchant cash advance from various UK providers. As with PayPal Working Capital, lenders provide capital in exchange for a percentage of future card sales. So they’re ideal for retailers. And you don’t have to be a PayPal business account user.

More working capital finance options to consider

There are lots of other good alternatives to PayPal Working Capital, which aren’t tied to your future card sales and revenue levels. Whether you sell products and services online or on multiple platforms, if you need fast access to funds, consider using one of the following working capital options:

• Small business loans – short-term secured or unsecured funding, depending on your situation and the lender, with monthly repayments (plus interest).
• Invoice finance – a fast way to use capital tied up in pending client invoice payments, where providers advance the payments with options to have them manage chasing and collections.
• Lines of credit – a flexible working capital solution from which businesses can draw down funds, as and when required.
• Flexible business loans – like iwoca’s Flexi-Loan, which offers tailored terms, flexibility of use and options to repay funds early without charge.

Our Flexi-Loans are designed specifically for the needs of SMEs, providing fast access to working capital to plug short-term cash flow gaps and fuel business growth. Enjoy the following benefits:

• Fast online applications and approval decisions within 24 hours.
• Borrow between £1,000 and £1 million and only pay interest on funds you draw down.
• Affordable monthly repayments aligned with your cash flow, with options to repay early fee-free as your circumstances change.

Apply for a business loan with iwoca or use our loan calculator to work out your likely monthly repayments.