It is very critical that small businesses remain liquid to finance their growing needs. But this might be difficult at times as buyers take time to pay their orders, as suppliers ask for prompt payments, and as customers request for more goods. This is why a small business loan can be essential. If you have been declined by PayPal working capital, here is what to do.
How PayPal Working Capital Works
This financing option works by advancing borrowers up to 18 percent of their yearly revenue that is carried out through PayPal, with a limit of up to $97,000. Just like a Merchant Cash Advance (MCA), the debt is cleared through a portion of daily revenue that is credited in the PayPal account of the borrower. This portion depends on the amount borrowed, which depends on the sales history of PayPal. You will pick a daily rate of repayment, but you will still need to repay the full amount in 18 months.
The biggest benefits of the loan program are the lack of late fees, penalty fees, pre-payment fees, and periodic interest charges. However, the program is only availed to users of PayPal, particularly those who have subscribed for PayPal Business and PayPal Premier for at least ninety days. For you to qualify, you need to have a minimum annual revenue of $15,000 for PayPal business and $20,000 for PayPal Premier.
Reasons for Decline
Even with the lack of requirements for eligibility, there have been numerous complaints with regards to applications being declined. The loan approval process for this lender is fully automated, which means there is no human involvement. And because there is no perfect system, the algorithm sometimes processes the applicant’s data incorrectly. This results in the rejection of loan applications. In 2015, an applicant was denied approval due to a glitch in the system. They were denied again a week later for the same reason.
Also, an applicant can be turned down if their sales are not regular. Sometimes, sales fluctuate during off seasons or when the chargebacks are higher than usual. When you have chargebacks that are higher than average, you can fail to get a loan even when your sales are strong. Hence, you can be declined for factors that you cannot control.
In case you get declined, you can look for alternatives. Some great options include Delancey Street, Square Capital, and more. For instance, Delancey Street has multiple funding programs that have flexible requirements, which is unlike PayPal. The lender does not look at your credit score when looking to approve you for a small business loan. Additionally, if you have a poor credit score, you can get the option of being approved for a bad credit loan. Similar to PayPal, you will not require collateral for most loans offered by this lender.
While you can fail to get a PayPal Working Capital loan due to fluctuating sales, Delancey Street offers loans that are customized for seasonal businesses that have fluctuating sales. The lender offers some funding programs that allow these businesses to make smaller loan payments during off-peak seasons and higher payments during peak seasons.
Why Delancey Street
The funding program by Delancey Street that is closest to PayPal’s working capital program is an MCA. This kind of working capital financing offers a lump sum that is repaid through a fixed portion of future debit or credit card revenue. But there are differences between PayPal working capital and Delancey Streets MCA.
For instance, while PayPal’s working capital requires repayment within 18 months, this lender’s MCA repayment period is dependent on sales only. Hence, this MCA is suitable for numerous seasonal businesses. Additionally, while PayPal’s system is fully automated, Delancey Street’s loan approval system is done by people. The lender offers the best customer service, and you can give them a call in case you need any clarification. Because of this feature, you will not be denied a loan because of system glitches. However, you will need to be slightly patient because humans are not as fast as machines.
Similar to other lenders, PayPal has its pros and cons. If they decline you, it is definitely for the best. There are other better lenders out there, like Delancey Street.