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New Deal Between PayPal and GE Offers Microloans

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Thanks to an agreement between PayPal and GE Consumer Finance, small businesses will have a new tool for hooking customers when they sell their wares on eBay.

The joint product, PayPal Buyer Credit, works just like a credit card, although it will be available only to businesses and customers on eBay. The deal follows an earlier credit offer from GE and PayPal, which is owned by eBay, that had a limit of $50,000. This new effort is aimed at individuals and small businesses and has a maximum credit limit of $7,000.

"It is great that GE and PayPal are joining forces to offer microloans to smaller businesses," Mike Stamler, a spokesperson for Small Business Administration, said. "Anything that makes it easier for small businesses to get capital is a good thing."

Erin Fuller, executive director of the National Association of Women Business Owners, noted that microcredit has been known to help small businesses get started. "It could be a useful resource for women who are trying to start their own businesses," she said.

Ebay hopes the PayPal Credit Buyer will help small businesses compete against retailers offering deferred interests, because now sellers have the ability to offer new types of financing. For example, eBay sellers with high approval ratings can offer either a lower interest rate on purchases that exceed $1,000, or interest-free payment periods on purchases over $199.

One analyst suggested that the success of PayPal Buyer Credit comes down to whether both buyers and sellers take advantage of the new product.

"The key here is to make this product a value-added service," said Penny Gillespie, a senior analyst with Forrester Research Inc. of Cambridge, Mass. "I can see the product being a very successful solution for small businesses if the relationship is reciprocal -- if a small business were to use PayPal for buying as well as selling."





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