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I was tinkering with the paypal working capital thing today considering getting a loan for a purchase of a truck I will resell. Their first calculator said the fees would be around $550 for a $6k loan.
Once I went through the efforts of actually applying, the fee for $6k at 30% pay off is $849.That is absolutely NOT a deal. I can get an instant line of credit from my credit union and my total fees would be $300 if I paid it in full in a year and $576 if I took 2 years. I’ll make around $4k selling this truck, so $300 is a drop in the bucket and then I’ll have a permanent line of credit to use for my business at a significantly lower credit rate than my CC.
In the past I have played with the calculator and partially going through the motions and I don’t recall the fees ever being that high.
Oh and the fees skyrocket if I either raise the amount of loan or decrease the payoff percentage
The fee if I pay off with 15% of sales is $2060!!!If I increase the loan to $8500 and keep it at 30% rate the fee is $1819.
I Was thinking about using paypal working credit, but at these rates screw it.
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If you can get a no-fee loan from your credit union, I’d use that first. We used Working Capital because our bank wanted to charge us a $2k origination fee to borrow $20k, plus charge us interest until paid off.
I forgot the exact numbers, but I felt the one time fee was completely reasonable when we borrowed money to build our warehouse. Maybe they’ve raised the fee rate? Or maybe the fee rate is higher for lower amounts? We borrowed over $20k.
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I think rates may have gone up. I borrowed from them in early Spring and remember thinking that the fee/rate was pretty high compared to the 2 other times I borrowed previously. And that was with selecting the 30% payoff rate and having a history of repaying the prior few loans way ahead of schedule. I guess the loan product is so popular that they can charge that much or they’re taking more losses on it than before so they have to make up for that by charging more. I recall I tried to calculate what the effective APR would be (if it were calculated as such instead of being called a “fee”) so I could compare it to other loan products on the market and it was up there.
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In my case a 30% loan had an expected 10 month payoff. Extrapolating that to a year to yields an APR of 17%. That is worse than a credit card.
At the 15% payoff the fee is $2060. Assuming the same numbers for the other case the payoff would be 20 months. The total fee is 34.3% which works out to a 20.6% APR.
Since there is no daily compounding for paypal the math is pretty easy.
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Borrowing money is never going to be cheap. It’s all about opportunity costs. If we hadnt borrowed that Working Capital loan last Fall, we wouldnt have had an awesome storage warehouse this year. It’s changed our whole business. Obviously its always better to pay in cash, but we’re happy to have that upgrade and its worth the fee.
Tsatt said when eBay moves to their new payment system, they’ll use https://squareup.com/capital to offer eBay sellers loans. Not sure if the rates are much better.
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If you can get a loan from a credit union, that typically seems to be the cheapest place. Another place to check is a peer-to-peer lending option like Lending Club or Prosper. Lending Club says on their home page that they can give you an estimate without impacting your credit score so it must be a soft pull. I didn’t try it.
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Borrowed 30k at the end of June 2018, at the 30% payback the fee was $1,528. So thats 5% give or take? No credit check, income proof and instantaneous decision sealed the deal for us. I also like the small payments everyday versus a lump monthly sum.
Only real downside is that they take the 30% out of the gross sale, including shipping. So you pay a bit out of pocket for each shipment. Also refunds do not reverse fee payment so if you have a $200 sale and have to refund your still out $60.
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