Square Capital vs. PayPal Working Capital

[ccex]

Recently eBay sent me a solicitation for a loan through Square Capital.    I suspect that eBay has found a new partner to steer sellers' interest payments away from PayPal.

I thought it odd that the prominently displayed illustration shows a 6-month loan of $55,000 for a total borrowing cost of $5,500.  I wondered if the borrowing cost exceeded 10% of the principal on a much smaller loan, so I started to do some comparison shopping.

I have had good experiences with PayPal Working Capital when I've needed to make a large inventory purchase.  PayPal's total borrowing costs have seemed reasonable to me.  Their website shows details of the loan's repayment progress  When I checked with them a couple of weeks ago, total borrowing costs were never above 10% for me unless I paid back the loan at the slowest possible rate.  The loans I am considering would cost me 6% to 8% with estimated payoff times of about six months.

When I went to the Square Capital website, I  could not get a quote without giving them my online banking user account and password.  They promised that it would be safe to give it to them, but I hit the back button immediately, and decided to ask other sellers' opinion here.   I recall eBay partnering with a couple of firms with a "slightly less than wonderful"  reputation among sellers.  My questions are:

1) Which company has a lower cost of borrowing:  Square Capital or PayPal Working Capital?

2) Which company is more trustworthy and why?

[toooldtorock]

"I too have used several PP Working Capital loans. I would like to note, while there is no time

table to repay, in the terms they want at least 10% of the loan paid every 90 days, so it would

have to be paid off in around 900 days, or 30 months."

You will get "helpful" phone calls from them if you are not meeting their expectations on repayment.

And they have all your information right in front of them.

[tools*]

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@voguevintage wrote:
It's not annual, it's one time. Your interest rate may not be 6%, though. But it won't be 20 - 30%. My last one was also 6%, so I think that is the rate, but I'm not 100% sure.

There are some basic eligibility requirements too:

Have a PayPal Business or Premier account for 3 months or more
Process between $20,000 and $20 million in annual PayPal sales if you have a Premier PayPal account or between $15,000 and $20 million in annual PayPal sales if you have a Business PayPal account
Pay off any existing PayPal Working Capital loan

So, yes, you could borrow $1,000 from PayPal and only pay $60. And there is no term, so it could last however long you need to repay it. There only requirement is you pay back a required percentage amount per quarter. It's easy to meet (I've never come close to not meeting it so I've never paid attention).

But the percentage pay back is this: 5% minimum per quarter for loans estimated to take 12 months or more to be repaid. A 10% minimum applies to loans estimated to be repaid within 12 months. Like I said, if you had the sales to qualify for the loan in the first place, it should be easy to do.

But I've taken out a $10,000 loan before. Basically, with no credit check or anything, you go to the PayPal Working Capital website and get a quote. They will give several options for amounts you can take out a loan for and the pay back rate (you can also customize this if you like and it will give you the pay back rate based on what you ask to be loaned).

They determine these numbers by your overall sales and also history seems to have something to do with it. If you've done a PayPal loan before and paid it off, they seem to be willing to offer you better deals and more money.

I'm on my 5th working capital loan. The last one they offered me up to $65,000 at a 30% I think. I didn't take that much, obviously, but I don't think my sales quite justify that.

Here's an example of what the quotes they may give you could look like

$1,000 at 10%
$2,000 at 15%
$3,000 at 20%
$4,000 at 25%
$5,000 at 30%

Your numbers could look totally different, but this is an example. Now, those percentages are NOT your interest rate. Your interest rate would be like the 6% we discussed earlier. Those percentages are your PAYBACK rate.

For example: if you got a $1,000 loan at 6% interest you would owe $1,060. If you picked a 10% pay back rate PayPal would take 10% off the top from every sale you make and put it towards paying off the loan until it is paid off. This is done immediately and automatically and usually starts about 3 days after you receive your funds after accepting the loan.

If you do take the loan out, by the way, they will send you the money INSTANTLY. Like within a minute. It's crazy how fast the process really is...

I was at an auction when I took out that $10,000 loan. I had a $2,000 budget but realized I had the chance to hit a home run so right then and there I took out that loan and BOOM $10,000 was in my account.

Another thing is that if you need big cash fast and still have a loan and you can afford to pay it off, you can and take out another one right after. I've had situations where I needed funds for a big inventory purchase and had like...$700 left on my loan, so I just paid that off and took out a fresh loan. It does take like 2 - 3 days for the loan to officially be marked as paid off after that last payment, however.

Oh and if you have a friend who sales on eBay and uses it that can be awesome if they have the ability to take out a fresh loan or vice versa. My friend and I both were going to this auction last year and I needed about 5k but had about $1,700 left on my last loan. He had just paid is off and was going to take out a fresh one. So I asked him to take out 7k instead of 5k and then to send me $1,700 so I could pay off my loan. A few days later, after my loan officially was marked paid, I took out a fresh loan and sent him the money he paid me back from that.

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It sounds like what you're saying is that you don't actually know what interest rate PayPal is charging.

[esg-enterprises]

It all depends on your volume through PP, I run average 20K a month, so I pay the loan back quicker than someone doing 5K, my first loan was 18K and my fee was 1100, but payed back in less than 6 months, I believe.

I have found it very difficult to get any kind of loan from a bank being self employed.

[tools*]

According to PayPal's website, the fixed fee ranges from 9.5% to 39.29%. Calculated as an annual interest rate, it would be in Payday loan territory. In other words, usury.

[michaegree_39]

So eBay forced me to go with the managed payments and I have a PayPal loan but now nothing goes through PayPal anymore so I won't be getting a new loan now cause they can't track it.   And they are forcing everybody to switch to managed payments over the next couple of months

[michaegree_39]

They are forcing everyone away from PayPal in the next couple months have already switched me so nothing goes through PayPal

[highvelocityproducts]

Is eBay MP optional?  I just signed up for it but I hadn't considered that wherther or not I would be eligible for PP Working Capital.  Maybe PayPal will allow payments directly form a bank account as opposed to a percentage of sales. 

[tintin-diesel-parts]

I just Paid off my Paypal working capital. I was trying to apply for a new loan but got denied by a code DLGJ0656 because Ebay forced me to move to MP since October or it wont list my new items up.  Does Anyone has any ways to get paypal working capital loan while you go with Ebay MP? Thank you! 

[windyman55]

Have any luck finding a work around with this situation? I'll be in the same boat if the CRAYON EATERS at eBay force me into the "IMPROVEMENT" of MP.

[vssoutlet]

Huge differences between Square and PPWC loans. Perhaps the most important are:

1) Square takes your personal credit score into account in granting loans. PPWC does not. 

2) PPWC loans don’t involve a personal guarantee. If you default, PPWC can go after your business, but not your personal assets. 
3) PPWC loans are based on the total sales coming into your PayPal account. Square loans are based on your eBay sales only. 
4) Square forces you to disclose far more personal and business data than PPWC does. In case of a default, this gives the creditor far more insight into your finances. 

On a related issue, eBay managed payments does not support the Global Shipping Program which enables sellers to sell expensive items internationally with significant protection. There has been no statement from eBay stating if or when, they will support GSP under managed payments. 

***

[zphi2945]

No, those are percentages that would come out of ongoing sales until loan is paid off. loan fee is usually 10% OR LESS

[hurley_byrd_ias]

I just got off the phone with PayPal Working Capitol (PPWC) and they explained there will be a program that rolls your eBay Managed Payment (eMP) sales into your PP account which will fulfill the legal requirements for PPWC and also allow PPWC to view your sales activity.  With that, they can then make new loan offers, etc... as they always have.

The PPWC Rep said that it appears at this time they will be guiding eMP users having PPWC to make a Wells Fargo Bank Account and that account will automatically sweep into our PP accounts without transaction fees being removed. Again, only for eMP transactions. I suspect the Wells Fargo Bank Account is the legal bridge required by eBay for the mandatory "Bank Account" needed to dump our payments into in the first place.

The PPWC Rep was well informed with concise information. I suspect this is a call he has taken a number of time.  I did ask when this was getting launched and he was unable to give a firm date. But he felt that May will see a soft rollout and June will see the full blown program.

Keep your eyes open. There is light at the end of the tunnel.

Pete

[thecrazyham]

This is good news, the only reservations I had with managed payments is I want to keep my PayPal working capital. It's convenient, easy, and cheaper then any loan I can get locally.  As a self employed person brick and mortar Banks tell you to pound salt on a loan request even with excellent credit. 

I have been working on trying to get another bank account set up to deal with Managed payments, it's not easy right now with the half the dang world closed.

I called PayPal yesterday and got a completely different response. All they told me was that I would default on my loan if I got switched to managed payments. I told them well it's not my choice!

[kh-ornesh]

Hello Everyone,

Due to the age of the thread, it has been closed to further replies.  Please feel free to start a new thread HERE if you wish to continue to discuss this topic.

Thanks for understanding!