Is it to anybody’s real surprise that tech companies are set to take market market share over high street banks? Paypal has now launched its ‘Working Capital Loan Product‘ which essentially allows small business to access cash loans through their Paypal account in Australia.
Right now they currently have in the region of 110,000 merchants using their payments platform in Australia which is circa 30% of Australia’s small business customers, or about 33,000.
Small businesses will be able to lend up to 8% of the total of their yearly PayPal transactions or up to $20,000. Repayments are agreed with the business owner when they make a sale and are between 10% and 30% of the loan size. This similar to the merchant loan advance product here in the UK.
Australia has one of PayPal’s largest small business markets, is one of the first countries outside the US to get the new product.
Kareem Al-Bassam, PayPal Australia’s director of customer experience and delivery said “Allowing small businesses to gain access to capital fast will make them more agile.”
“What we’re seeing through greater digitalisation and elaboration of the digital economy is the ability to get that moving faster, cleaner and more efficiently and for the end users whether it’s the consumer or the merchant, less costly as well,” Al-Bassam told Business Insider.
“We’re using data and technology to provide a tailored credit solution that meets the needs of small businesses today.”
Al-Bassam said Australia’s small business market “hasn’t been properly serviced to date which means the company sees the segment as brimming with opportunity and this new offering is one way PayPal is hoping to fill that gap.” He also stated “In Australia there’s 2.2 million small to medium businesses. It’s an under-served segment,” he told Business Insider.”
“There needs to be better solutions to help small to medium businesses access capital as a business and at reasonable and transparent terms.”
“PayPal’s investment in Working Capital is another demonstration of our commitment to support and encourage Australian SMBs, which make such an essential contribution to the Australian economy, by providing them with innovative solutions and technology to expand their businesses.”
It’s not for startups however. To qualify for the loan small businesses need around a years trading history already through their Paypal merchant account.
In the UK there are more and more lenders coming into the merchant loan advance marketplace which is only a good thing for businesses in the UK to access unsecured funding. High street banks are re-aligning themselves with alternative finance companies as to not lose their grip in the marketplace altogether. Alternative finance companies have opened the door to business owners in the UK otherwise ‘back-healed’ by their high street bank. The new revolution in business finance is here and it’s online.