How to Choose Between PayPal Loans, Square Loans, or Fundbox Loans For Your Business

It can be hard to get a business loan. This is especially true if you are applying for loans from a traditional bank.  Sometimes alternative lenders are a better option.  You may not realize that companies like PayPal and Square offer loan options for their customers. There are also companies, like Fundbox, that require you to be a customer with them first.  These are not banks, so they are referred to as alternative lenders.  How do you decide if PayPal loans, Square loans, or Fundbox loans right for your business? 

Are Loans from PayPal, Square, or Fundbox Easy Business Loans? 

Getting a business loan is not always easy.  It can take a long time to find one that is right for your business. This is partially due to the fact the requirements vary widely between lenders. The number of requirements vary as well.

Sometimes you not only need a good credit score, but also collateral, a minimum time in business, and minimum average revenue. Not all businesses meet all of these requirements at once, making it hard to qualify. 

Other Options

There are alternative lenders, however, that make things a little easier, even if they aren’t exactly easy business loans. They may have less stringent requirements or rely on things other than collateral or credit score. Fundbox, PayPal, and Square are just a few examples.

Find out why so many companies use our proven methods to get business loans.

PayPal Working Capital Loan

If you have a business account with them already, you can get PayPal loans. No personal guarantee is required, and they do not do a credit check. Instead, loan amounts and eligibility depend on your sales via the platform. The maximum loan amount depends on your account history with the company. 

To be eligible, you must have a Premier or Business account with them for 90 days or more.  In addition, if your account is Premium, you must have at least $20,000 in annual sales with them.  If it’s a business account, you must have at least $15,000 in annual sales on the account.  You also have to pay off any existing loan with them before you can get another one. 

Since payments are automatically deducted as a percentage of each sale through the account, the amount you pay each day varies with your sales volume.  As a result, the more you sell, the more you will pay on the loan that day.

You’ll make no payments on days without sales, but there is a minimum repayment requirement every 90 days. Depending on the loan terms you choose, you must pay at least 5% or 10% of your total loan amount (loan + the fixed fee) every 90 days. 

The 5% minimum applies to loans estimated to take 12 months or more to repay, based on your business’ past sales through the company and other factors. The 10% minimum applies to loans estimated to be repaid within 12 months.

 Are PayPal Loans Right for Your Business?

If your sales volume is strong enough to keep up with repayment and not put your business at risk, it could be a great funding opportunity. It’s probably not something you should open a account with them for on it’s own, but if you already have one it is definitely an option to keep in mind. 

Loans from Square

You can also get loans through Square if you have a Square account. Similar to PayPal loans, applying will not affect your personal credit score. Loan eligibility is based on a variety of factors related to your business, including its payment processing volume, account history, and payment frequency.

Loan amounts range from $300—$250,000. You’ll get a customized offer based on your business’s card sales through Square. There is no interest, just an ongoing flat fee. 

The fixed fee is the difference between the total amount you owe and the initial loan amount. It will never change, regardless of how quickly or slowly you repay the loan. It automatically deducts until your loan is fully paid. 

Like PayPal loans, daily payments fluctuate with sales. On days with higher sales, you will pay more than on days with lower sales. You must pay a minimum of 1/18 of the initial balance  every 60 days. 

Square doesn’t require collateral for business loans of $75,000 or less. For loans over $75,000, they take a security interest in your business assets. They will file a UCC statement with the Secretary of State where your business is organized. There is no personal guarantee.

Is a Square Loan Right for You? 

If you work with Square and need less than $75,000, you don’t even need collateral. That can be a great option. However, if you need more than $75,000, the required UCC statement may be a turn off. 

Find out why so many companies use our proven methods to get business loans.

Fundbox 

If you do not already work with either of the other two, Fundbox may be a better option. Cash flow financing is easy with Fundbox. They just want to know about your cash flow when deciding whether to fund your business. They will connect directly to your online accounting software, and that’s all you need to do. 

Fundbox offers a revolving line of credit rather than term loans.  Amounts range up to $100,000. They will auto debit your weekly payment from your bank account.  The minimum personal credit score requirement is lower than that of most traditional lenders as well. 

You pay in equal installments over the course of a 12 or 24 week plan. Available credit replenishes as you pay, and there is no penalty to repay early. 

To qualify, your business must be based in the US and you need to have a 600+ personal FICO score.  Additional requirements include: 

  • $100,000+ in annual revenue
  • A business checking account
  • Ideally 6 months or more in business 

Are Any of These a Good Option for Your Business? 

That’s the real question, right? How do you know which one to choose? If you already have a relationship with PayPal or Square, and you qualify, then a Square or PayPal loan may be a good option. Unless you would prefer a line of credit, then you may want to consider Fundbox. 

Find out why so many companies use our proven methods to get business loans.

Of course, if you do not have a relationship with the other two, Fundbox it is. If you aren’t already using one of the payment processing companies, the lending options alone aren’t really a reason to start. Still, they could play a factor in a decision between the two if you are considering one or the other. 

Why Choose one of These Options Over Traditional Funding?

The main reason is the lower credit score requirements, or lack of credit score requirement at all. Also, the fact that collateral isn’t really an issue unless you are trying to borrow more than $75,000 from Square. These aren’t the only options however. Credit Suite has a number of funding options to fit almost any business. We can help you find the best fit for your specific needs.

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PayPal Working Capital Review: Will It Work for You?

PayPal Working Capital is a funding option offered through the PayPal online payment service.  What do they offer? Are they a good option for you? Let’s find out. 

What Does PayPal Working Capital Offer, and Is It Right for You?

If it is a good fit, PayPal Working Capital can help you run and grow your business. However, it  isn’t right for everyone. The product is solid, but there are some major drawbacks that make it perfect for some, and not so much for others. 

PayPal Working Capital Review:  The Basics

PayPal Working Capital has a physical address at: 

2211 North First Street

San Jose, California 95131.

San Jose is the home of PayPal Working Capital’s corporate headquarters.

You can call them at: (888) 221-1161. Their contact page is here: https://www.paypal.com/us/selfhelp/home. They have been in business since 1998 but that is actually how long PayPal itself has been in business.

Paypal Working Capital Credit Suite

Establish business credit fast with our research-backed guide to 12 business credit cards and lines.

PayPal Working Capital Review: Amounts and Eligibility

PayPal offers flexible payments with a fixed fee and no credit check. The reason they can offer no credit check is that they use your PayPal business transactions as the basis for approval.  The amount of your loan and fees are all dependent on the amount of you take in each year through PayPal. In addition, your loan is repaid as an automatic deduction of collections through PayPal, so as long as you are collecting money through PayPal, they will get their money.

The maximum loan amount can be up to 30% of annual PayPal sales, and no more than $97,000 for a first loan. The third loan can be up to $125,000. Your business can get funding in minutes and there is no early payment penalty.

You must have a PayPal Business or Premier account for 3 months or longer to qualify. You also have to process more than $20,000 in annual PayPal sales if you have a Premier PayPal account.  A regular business PayPal account only requires $15,000 annually to be eligible. 

PayPal Working Capital Review: Rates, Terms, Fees and Repayment Options

Automatic repayments are deducted as a percentage of each PayPal sale. The fee is based on your business’s PayPal sales history, your loan amount, and the repayment percentage chosen. A higher payment percentage will lower the fee. 

You can use their calculator tool to get an idea of what fees might look like with different repayment percentages.  It can also help you get a feel for how everything works. You do have to pay a minimum amount over a 90-day period, which PayPal claims is easily met by most out of the daily sales percentage.  However, if there were a 90-day period where you were not able to hit the minimum out of sales, you can log on and make a payment. 

Keep in mind, you get to choose what percentage of sales is taken as repayment.  The calculator will show you several options, but the larger the percentage the lower the fees. The website offers these examples: 

  • If you borrow $10,000 ($9,800 loan + $200 fixed fee) and the loan is estimated to be repaid in 13 months based on your previous years’ PayPal sales, then your minimum repayment is 5% or $500, every 90 days.
  • If you borrow $30,000 ($29,500 loan + $500 fixed fee) and the loan is estimated to be repaid in 8 months based on your previous years’ PayPal sales, then your minimum repayment is 10% or $3,000, every 90 days.

PayPal Working Capital Review: The Brass Tacks

For those with steady, reliable PayPal sales, this is a great option.  Keep in mind however, the amount you are eligible to borrow will be limited by your PayPal sales amounts.  If you make sales via other platforms, that revenue will not be included in the decisions making process. 

What If I do not Qualify for PayPal Working Capital? 

One of the top reasons why business owners use PayPal Working Capital is that there is no credit check.  If credit is an issue, it’s time to get to work so you can have more funding options. Credit isn’t the only thing you have to work on however. It is possible the complete fundability of your business needs work.  

The Fundability Puzzle (for PayPal Working Capital and More)

Fundability is the ability of your business to get funding.  It is affected by many variables, only one of which is business credit.  The better your fundability, the more funding options you will have.  

What affects the fundability of your business?    The answer isn’t hard, but it is kind of long.  Sure, a great business credit score is important, but there are so many more pieces to the puzzle.  

The key is, a potential creditor needs to see that your business is legitimate and profitable.  Many loan applications are denied approval due to fraud concerns.  Others, simply because something didn’t match up and threw up a red flag. Maybe the addresses or phone numbers didn’t match on a couple of reports and it just looks unprofessional.  Business credit just isn’t the whole story.

If you understand what fundability is and how to get it, you can open up a world of funding options you never had before.

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Establish business credit fast with our research-backed guide to 12 business credit cards and lines.

Building a Foundation of Fundability

The foundation of fundability is in how your business is set up.  It has to be set up to appear to be a fundable entity separate from you, the owner.  How do you accomplish this?  Well, like any foundation, it is best to start at the beginning.  It will be faster and easier if you do. However, if your business is already up and running, then you may not have that option.  That’s okay, it’s never too late to start, but start now.  For several reasons, the longer you wait the harder it will be. Here is what it takes to build a fundable foundation.

Contact Information Specifically for the Business

The first step in setting up a foundation of fundability is to ensure your business has its own phone number, fax number, and address.  That doesn’t mean you have to get a separate phone line, or even a separate location.  You can still run your business from your home or on your computer. 

You can get a business phone number and fax number easily that will work over the internet instead of phone lines.  Also, the phone number will forward to any phone you want it too so you can simply use your personal cell phone or landline if you want.  Whenever someone calls your business number it will ring straight to you. 

An EIN Is Essential

The next thing you need to do is get an EIN for your business.  This is an identifying number that works in a way similar to how your SSN works for you personally.  You can get one for free from the IRS.

You Must Incorporate

Incorporating your business as an LLC, S-corp, or corporation is necessary to fundability.  It lends credence to your business as one that is legitimate. It also offers some protection from liability. 

Which option you choose does not matter as much for fundability as it does for your budget and needs for liability protection.  The best thing to do is talk to your attorney or a tax professional.  What is going to happen is that you are going to lose the time in business that you have.  When you incorporate, you become a new entity. You basically have to start over. You’ll also lose any positive payment history you may have accumulated, so the sooner you incorporate, the better.

A Dedicated Business Bank Account Cannot Be Ignored

You have to open a separate, dedicated business bank account.  There are a few reasons for this.  First, it will help you keep track of business finances.  It will also help you keep them separate from personal finances for tax purposes. 

However, there are also several types of funding you cannot get without a business bank account.  Many lenders and credit cards want to see one with a minimum average balance.  In addition, you cannot get a merchant account without a business account at a bank. That means, you cannot take credit card payments.  Studies show consumers tend to spend more when they can pay by credit card.

Get Your Licenses

Fundability also includes being a legitimate business.  For a business to be legitimate it has to have all of the necessary licenses it needs to run.  If it doesn’t, red flags will go up.  Do the research you need to do to make sure you have all of the licenses necessary to legitimately run your business at the federal, state, and local levels. 

Don’t Forget the Website

A business website can affect your ability to get funding.  These days, you do not exist if you do not have a website.  

Spend the time and money necessary to ensure your website is professionally designed and works well.  Pay for hosting also. Don’t use a free hosting service.  Along these same lines, your business needs a dedicated business email address.  Make sure it has the same URL as your Website. Don’t use a free service such as Yahoo or Gmail.

Other Pieces of the Fundability Puzzle

In addition to having a fundable foundation, you need these pieces to complete the fundability puzzle and have the complete picture.

Business Credit Reports 

Your business credit report also affects fundability.  That is the credit report, much like your consumer credit report, that details the credit history of your business.  It is a tool to help lenders determine how credit worthy your business is.  

Where do business credit reports come from?  There are a lot of different places, but the main ones are Dun & Bradstreet, Experian, Equifax, and FICO SBSS.  Since you have no way of knowing which one your lender will choose, you need to make sure all of these reports are up to date and accurate. 

Other Business Data Agencies 

In addition to the business credit reporting agencies that directly calculate and issue credit reports, there are other business data agencies that affect those reports indirectly.  Two examples of this are LexisNexis and The Small Business Finance Exchange. These two agencies gather data from a variety of sources, including public records.  This means they could even have access to information relating to automobile accidents and liens. While you may not be able to access or change the data the agencies have on your business, you can ensure that any new information they receive is positive.  Enough positive information can help counteract any negative information from the past. 

Identification Numbers 

In addition to the EIN, there are identifying numbers that go along with your business credit reports.  You need to be aware that these numbers exist.  Some of them are simply assigned by the agency, like the Experian BIN.  One, however, you have to apply to get. It is absolutely necessary that you do this. 

Dun & Bradstreet is the largest and most commonly used business credit reporting agency.  Every credit file in their database has a D-U-N-S number.  To get a D-U-N-S number, you have to apply for one through the D&B website

Business Credit History

Your credit history has everything to do with everything related to your credit score, which is a huge factor in the fundability of your business.  

Your credit history consists of a number of things including: 

Paypal Working Capital Credit Suite

Establish business credit fast with our research-backed guide to 12 business credit cards and lines.

  • How many accounts are reporting payments?
  • How long have you had each account? 
  • What type of accounts are they?
  • How much credit are you using on each account versus how much is available?
  • Are you making your payments on these accounts consistently on-time?

The more accounts you have reporting on-time payments, the stronger your credit score will be. 

Business Information

On the surface, it seems obvious that all of your business information should be the same across the board everywhere you use it.  However, when you start changing things up, like adding a business phone number and address or incorporating, you may find that some things slip through the cracks. 

This is a problem because a ton of loan applications are turned down each year due to fraud concerns simply because things do not match up.  Maybe your business licenses have your personal address but now you have a business address.  You have to change it. Perhaps some of your credit accounts have a slightly different name or a different phone number listed than what is on your loan application. Do your insurances all have the correct information?  

The key to this piece of the business fundability is to monitor your reports frequently.   

Financial Statements

This encompasses a broad spectrum of things.  First, there is the obvious. Both your personal and business tax returns need to be in order.  Not only that, but you need to be paying your taxes, both business and personal.  

Business Financials

It is best to have an accounting professional prepare regular financial statements for your business. Having an accountant’s name on financial statements lends credence to the legitimacy of your business. If you cannot afford this monthly or quarterly, at least have professional statements prepared annually. Then, they are at the ready whenever you need to apply for a loan. 

Personal Financials

Often tax returns for the previous three years will suffice.  Get a tax professional to prepare them.   This is the bare minimum you will need.  Other information lenders may ask for include check stubs and bank statements, among other things. 

Bureaus

There are several other agencies that hold information related to your personal finances that you need to know about.  Everyone knows about FICO.  Your personal FICO score needs to be as strong as possible. It really can affect business fundability and almost all traditional lenders will look at personal credit in addition to business credit. 

In addition to FICO reporting personal credit, you have ChexSystems.  In the simplest terms, this keeps up with bad check activity and makes a difference when it comes to your bank score.  If you have too many bad checks, you will not be able to open a bank account.  That will cause serious fundability issues. 

For this point, everything comes into play.  Have you ever been convicted of a crime? Do you have a bankruptcy or short sell on your record?  How about liens or UCC filings? All of this can and will play into the fundability of your business. 

Personal Credit History

Your personal credit score from Experian, Equifax, and Transunion all make a difference.  You have to have your personal credit in order because it will definitely affect the fundability of your business.  If it isn’t great right now, get to work on it.  The number one way to get a strong personal credit score or improve a weak one is to make payments consistently on time. 

Also, make sure you monitor your personal credit regularly to ensure mistakes are corrected and that there are no fraudulent accounts being reported. 

The Application Process

So much plays into this that you may not even think about. First, consider the timing of the application.  Is your business currently fundable?  If not, do some work first to increase fundability. Next, ensure that your business name, business address, and ownership status are all verifiable.  Lenders will check into it.  Lastly, make sure you choose the right lending product for your business and your needs. Do you need a traditional loan or a line of credit? Would a working capital loan or expansion loan work best for your needs?  Choosing the right product can make all the difference. 

PayPal Working Capital Review: A Final Word

The more options you have, the better.  If you do a ton of business on PayPal, then PayPal Working Capital is a completely legitimate option.  However, regardless, it is best to ensure your overall fundability is in order so you can have as many funding options as possible. 

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