Remember the credit crunch? Back in 2007-08, it was the name given to the rapid tightening of lending criteria by financial services providers all over the world, in response to shocks like the sub-prime lending crisis.
Back then, even the most pessimistic of economists could not have foreseen how approving mortgages to people who couldn’t really afford them would shake out for the entire global economy, but seven years later we’re all a little older and a lot wiser.
However, putting the economy back on its feet is proving to be something of a herculean task – and uniquely in this recession, it’s the alternative lenders who are often offering the most relaxed criteria for businesses and individuals alike.
Into this landscape, online banking provider PayPal are striding with their new PayPal Working Capital service, launching this autumn for business users of the website.
It offers a cash advance to merchants, chargeable against future sales made via PayPal, and it’s fundamentally linked to your affordability based on your account history with the site.
That means a quick decision, with funds provided within minutes at an affordability level determined by how much money regularly comes into your PayPal business account – even if you use it for fairly ‘informal’ transactions like selling on eBay.
No credit check is needed as the money is not officially a ‘loan’, but is instead described as a ‘merchant cash advance’; there are no fees for late repayment, and no interest charges, only a single upfront cost for using the service.
As for repayments, they are made using a proportion of your future incoming PayPal funds from customers, so if you have a slow period in terms of sales, nothing will be taken from your account.
The way you use the funds is entirely up to you, too – from covering essential admin costs to launching marketing campaigns, or simply paying bills for stock and so on.
PayPal say: “For the first time in Britain, PayPal business customers (including eBay sellers) will have access to a merchant cash advance against their future sales, meeting a real business need for small businesses.
“They may want the money to buy stock for Christmas trading, to pay to translate their website to grow overseas sales or perhaps to get marketing support.”
Selected customers will have the service this autumn, ahead of a planned wider rollout in 2015 – so if you are a PayPal business customer, watch this space.