October 27, 2015 / 4:33 PM / in 2 years

PayPal says makes $1 billion in small-business loans in first two years

LAS VEGAS (Reuters) - PayPal Holdings Inc (PYPL.O), the online payment processor, said on Tuesday its small-business lending program has processed $1 billion in loans in the first two years of its launch and more than doubled loan growth in that span.

The PayPal logo is seen during an event at Terra Gallery in San Francisco, California May 21, 2015. REUTERS/Robert Galbraith

PayPal Working Capital is extending short-term loans totaling more than $100 million per month, or $3 million per day, to a mix of sellers on eBay Inc (EBAY.O) and standalone small- to medium-sized merchants, the company said at a payments conference in Las Vegas.

PayPal separated from eBay earlier this year, and Chief Executive Officer Dan Schulman has stated he is looking to use PayPal’s size to offer affordable financial services widely.

The biggest challenge for a small business is getting access to credit and about 90 percent of businesses to which PayPal extends credit come back for a repeat loan, Steve Allocca, PayPal vice president and general manager, global credit, told Reuters.

Allocca said the businesses pay back loans as a percentage of daily sales.

Online lending accounts for about 3 percent of the roughly $1 trillion of outstanding personal and small business loans in the United States.

The default rate for small businesses with credit under a $1 million stood at 1 percent in 2014 but is seen rising to 1.6 percent in 2015 as new lenders, with varying ability to assess risk, increase lending, according to small business credit ratings provider PayNet.

In June, Amazon.com Inc (AMZN.O) said it was extending its small-business lending program to seven new countries where credit is a key factor in competing for new vendors and grabbing market share.

PayPal currently offers credit to businesses in the United States, UK and Australia.

Editing by Jeffrey Benkoe

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