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Christopher Menkin
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Christopher "Kit" Menkin is of editor LeasingNews.org (http://www.leasingnews.org/), an internet trade publication for the finance/leasing industry. He has 41 years experience in the finance/leasing industry as well as being a founder of a commercial regional bank and serving on... More
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  • The Growth Of Business Loans By Private Lenders 0 comments
    Oct 1, 2013 1:55 PM

    by Christopher Menkin

    As "PayDay" loans have grown in the consumer sector, private lenders have stepped into the under $100,000 business loan category, filling in where factoring invoices do not fit, but cash flow, equipment, inventory, and other needs by business for growth are in demand. The rate appears secondary as the business realizes if it can make a profit much higher than the cost of capital, additional capital then becomes quite necessary not only for survival, but for growth.

    Two of the latest are World Business Lenders and Braintree. While the names may not be appealing, what they can provide is. In Braintree's instance, PayPal announced last week they will be buying the company $800 million to primarily strengthen its PayPal unit presence on mobile devices as well as take out a rapidly growing rival. It's parent EBay reports that 40 percent of its revenue last year came from PayPal.

    Braintree, whose clients include online hotel booking service Airbnb and online restaurant booking service OpenTable Inc., expects to process about $12 billion in payment volume this year. It also provides merchant accounts, payment gateway, billing and credit card storage.

    PayPal recently started PayPal Working Capital, aimed primarily for qualified existing PayPal merchant customers, and most likely Braintree customers, too. According to PCWorld:

    "The cost of the loan depends on the amount borrowed (generally, up to 8 percent of total annual sales processed by PayPal in the last year), the percentage of sales receipts dedicated to paying the loan (between 10 percent and 30 percent), and the merchant's PayPal track record.

    (click to enlarge)

    "The higher the percentage of sales the merchant is willing to allocate to paying back the loan, the lower the overall fee. In PayPal's published example, for a business with $100,000 in annual sales that borrows the maximum, $8,000, the loan fee varies from $947 if the business opts to dedicate 10 percent of sales receipts to paying down the loan, to $281 for a business that dedicates 30 percent of its sales receipts to paying back the loan.

    "No credit check is involved, so the merchant's credit rating isn't adversely affected by the loan. PayPal says loan application approval can take as little as five minutes. PayPal wouldn't say how many merchants are actually eligible for the initial program, which runs through the end of the year.

    "PayPal will continue to collect its usual transaction fees from participating merchants, who must continue to use the service to process payments until the loan is paid off. PayPal will calculate the loan payment at the end of each business day, and withdraw the funds the following day."

    The higher the percentage of sales the merchant is willing to allocate to paying back the loan, the lower the overall fee. In PayPal's published example, for a business with $100,000 in annual sales that borrows the maximum, $8,000, the loan fee varies from $947 if the business opts to dedicate 10 percent of sales receipts to paying down the loan, to $281 for a business that dedicates 30 percent of its sales receipts to paying back the loan."
    http//pcworld.com/article/2049900/paypal-launc....html

    PayPal Working Capital Web site:
    https://www.paypal.com/webapps/workingcapital/

    New to the scene is World Business Lenders, based in Dubai, United Arab Emirates, headed by senior executives of Deutsche Bank, Goldman Sachs, and a who's who in international banking.

    "WBL provides short-term and flexible commercial loans for a range of operational needs. Typically, our clients choose to finance temporary dips in cash flow, invest in new equipment, or make time sensitive inventory purchases. As a private lender, WBL invests in projects that institutional banks may shy away from. Because we are not a broker, we stand behind every loan from start to finish."
    www.wbl.com/

    Where they Lend in the United States

    (click to enlarge)

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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