PayPal has recently introduced a type of loan to small businesses that only charge the companies a flat fee with no periodic interest.  This allows the merchants to borrow 8% of PayPal’s annual revenue and in exchange for that, PayPal takes away 10-30% of the company’s daily sales into paying back the loan.

PayPal adds a value proposition for its company as it now provides a service that is cheaper than bank loans which satisfies the need of financial support for their merchants.  PayPal is strengthening company image as well as company relationships with their merchants. The loan allows PayPal to provide small businesses a chance to thrive in the competitive society by supporting them financially. These businesses in return will build up trust and provide more for PayPal in the long term, similar to a return on investment for PayPal. This new service also makes the company more attractive compared to other competitors or other loaning services, therefore increasing the value of their brand.  Not only is PayPal providing merchants loans, this service is adding an extra revenue stream for PayPal, which is beneficial for the company as it does not have to rely solely on eBay transactions.

Reference:

Clark, C. (2013, September 24). PayPal Breaks Into Small Business Lending. Bloomberg Businessweek. Retrieved from http://www.businessweek.com/articles/2013-09-24/paypal-breaks-into-small-business-lending