All the evidence is that small- and medium-sized companies are still finding it hard to borrow from the traditional source of business capital, the banks, to expand.
Now, one of the few global internet businesses that encourages small firms, rather than trying to obliterate or buy up all the competition, has come up with an alternative source of cash.
So often, the business plan for digital firms involves emulating Acme, the supplier of gizmos that never quite work the way they should to Wiley E Coyote in the Roadrunner cartoons. Despite this flaw, Acme’s apparent dominance of mail order delivery was surely the inspiration for Amazon and others.
However, it’s PayPal that is trying to help the third of UK companies that, according to the government, rely on retained earnings or the owner’s own finances rather than bank or equity funding.
You’ll have to be a PayPal customer or a seller on parent company eBay’s auction site, but from this autumn selected small firms in the UK will be able to have access to a merchant cash advance against future sales.
The scheme is called PayPal Working Capital and has been ‘a big hit with business owners in the United States’ where it’s already up and running. You can find out more by following the link here. There is fixed fee displayed before a customer signs up, but no interest or late payment charges.
Advances are repaid from a share of sales made via the PayPal platform. No sales, no repayment that day.
Perhaps some snags will emerge (there are tales about a teenager cracking PayPal’s two-factor authentication), but on the face of it the benefits of the scheme are obvious to both parties. And once again, the high street banks are left looking flat-footed.
Working capital is vital for business to grow, and managing cash flow a key business necessity. SJ Collections has long experience of helping firms improve their cash flow by chasing unpaid invoices. And that can help when it comes to arranging finance from whatever source.