UK businesses could be set for a welcome financial boost following the announcement of a new PayPal project designed to help fund SME growth.
The payments company, best known for its work with online auction site eBay, has announced it will be bringing its Working Capital programme to the UK from the autumn, with a particular focus on boosting the growth of SMEs.
The scheme, which had been running in the US since last September, offers existing business users access to an interest-free merchant cash advance against their future sales. Only select customers will be able to access the funds following the initial launch, with wider access being rolled out next year.
PayPal says it will lend up to 8% of what a merchant has made on its platform over the past 12 months, but is not disclosing other details about what kind of interest it will charge on the base amount loaned.
The company says it charges a single, fixed fee that is available to businesses before they sign up, and promises "no periodic interest, no hidden fees, no set payment plan, no payment due dates, and no late fees", with payments made automatically as your business makes sales through PayPal.
Customers can also pay off their loan balance in full or in part at any time without incurring a penalty.
So far, the American version of the programme has provided over $140m in cash advances to SMEs in the country.
"Small businesses are the lifeblood of the British economy," Cameron McLean, managing director of PayPal UK, said. "But seven years after the start of the credit crunch, many of them are still struggling to get funding."
"According to the British government, around a third of SMEs rely on retained earnings or the owner’s own finances rather than bank or equity funding. This means that many find it very difficult to finance their present needs or future growth. And the problem is acute for smaller, online businesses. PayPal is well placed to make a difference."
