C-Suite Wednesday — PayPal is a Serious Small Business Lender

May 16, 2018

By Bob Coleman
Editor, C-Suite Wednesday

C-Suite Wednesday — PayPal is a Serious Small Business Lender

Paypal, Amazon and Alibaba pose more of a threat to traditional lenders than the Fintech industry.

As Fintech ebbs and flows, these high tech giants are starting to put up some serious small business lending numbers. Amazon just passed $3 billion.

Last year Paypal also topped $3 billion in small business lending in the United States.

In the UK, Paypal’s Working Capital program has grown 56% over the past year with £625 million loaned.

PayPal states this shows demand for “alternative financing that bridges the gap left by traditional funding providers.”

In the US, PayPal offers two financing programs, including one that is similar to the UK program, which takes a percentage of merchants’ PayPal revenue and is underwritten primarily on PayPal sales without a credit check. The other program available in the US is closer to a conventional business loan, taking into account a variety of credit factors and repaid with weekly payments from a business bank account.

Both offer quick, convenient funding, which is highlighted as a major advantage of PayPal’s services versus banks. Notably, 70% of their advances are done outside of normal bank hours. This advantage is largely facilitated by the company’s extensive data on their clients, minimizing the need for documentation. Loan amounts are as high as $500k for the business loan option and $125k for the cash advances.

Reports Global Trade Review,

According to Chris Skinner, an independent commentator on financial markets and fintech, the future will undoubtedly see the tech giants move further into the traditional banks’ territory – where it helps them grow their online business. Trade finance is an obvious target.

“All trade or supply chain finance or commercial or retail banking that involves any payment or credit is where they are going to focus. Because it helps get more buying and selling on their platform. This is where the banks should fear these internet giants,” Skinner tells GTR, saying that this will leave banks to “continue what they are doing, but getting much less margin and profits”.

The traditional banks, however, seems more dismissive about the threat from the tech giants.

Michael Vrontamitis, head of trade for Europe and Americas at Standard Chartered, denies the notion that tech giants will take away his business, noting that “large companies have used the extension of finance to support their core business for generations.”

“Infrastructure companies like GE and Siemens, or technology companies like IBM, Oracle, etc, actively support their clients through financing solutions to enable the sale of their product solutions. For me, tech platforms like Amazon and Alibaba are doing the same thing,

Check out my personal experience with a Paypal loan

SBA Hot Topic Tuesday — PayPal Tops $2 Billion in Small Business Lending, July 12, 2016