Credit lifeline for American small businesses
PayPal (PYPL) is a critical source of credit for American businesses left behind by folding banks. PayPal’s CEO, Dan Schulman, disclosed during a recent interview that 25% of the company’s working capital loans are to small businesses in US counties where at least ten banks have closed their branches. Banks tend to close branches in markets where the median income is below the national average.
The strong demand for PayPal loans in counties that have been hit hard by the outflow of traditional lenders shows that PayPal is providing a credit lifeline for American small businesses.
PayPal selling its consumer lending business
PayPal also supplies consumer loans, but it’s reducing its exposure to the consumer lending market. Last year, the company struck a deal to sell its US consumer lending operation to Synchrony Financial (SYF).
PayPal has written over $3.0 billion in loans to customers since 2013, while Amazon (AMZN) has lent a similar amount in loans to customers since 2011. Square (SQ) has advanced more than $1.8 billion in loans to more than 141,000 business customers since 2014.
PayPal’s revenue rose 24% year-over-year to $3.7 billion in the first quarter driven by strong growth in the segment, which included the lending business.