PayPal hits £400m mark in advances to UK businesses

Payments giant PayPal hits milestone and pins SME funding gap on bank branch closures.

Payments giant PayPal hits milestone and pins SME funding gap on bank branch closures. 

PayPal Working Capital, PayPal’s small business lending arm in the UK, has hit £400m in cumulative cash advances made to British businesses. Over 22,000 business owners have now taken out an advance from PayPal Working Capital since it launched in 2014. The £400m milestone comes after a 116 per cent increase in total cash advances made by the firm over the past year.

PayPal’s small business lending activities are considerably further advanced in the US, where it topped $2bn in cash advances in the summer of 2016.

The potential for technology giants like Google and Facebook to dominate the online lending sector has been the subject of much discussion over the past few weeks, after it recently emerged that Amazon has lent over $3bn to merchants via its online marketplace to date, including more than $1bn in the past 12 months.

Like Amazon, PayPal uses technology and its customers' transactional data to offer fast and flexible financing options. Its cash advances are made against future sales, with repayments made automatically as a fixed percentage of a borrower’s PayPal takings.

PayPal cites the National Audit Office’s estimate that the SME funding gap in the UK could range anywhere from £6bn to £39bn. Funding shortages are often felt most acutely by younger, smaller, online businesses, which have less conventional business models and/or established sales histories.

“PayPal made its name pioneering e-commerce, making it possible for businesses to grow their sales and reach millions more customers online,” said Mark Brant, managing director at PayPal UK. “In the years that followed the credit crunch, we saw the impact it was having on our small business customers, many of whom were struggling. We saw an opportunity for us to help and set about making PayPal Working Capital a reality.”

PayPal’s own research suggests that access to capital for small businesses has been made more difficult by the recent rash of bank branch closures across Britain. RBS, for example, closed down 158 branches in March. A third of all PayPal Working Capital's cash advances in the UK have gone to SMEs based in areas that have lost 50 or more bank branches during the last four years.