Leading payment facilitator PayPal announced last week that it plans to acquire Swift Financial, which provides working capital to businesses through both loans and advances on future revenue.
As we’ve noted previously, many small businesses are turning to payment facilitators for their capital needs. And PFs are seeing this business as one opportunity to expand the ways they serve their merchant clients’ business needs, in an integrated environment that includes payment processing.
The model has been growing for other leading payment facilitators. In its latest quarterly earnings announcement, Square reported that it grew its Square Capital loan volume 68% over last year, loaning out $318 million during its second quarter.
The company also announced that it was expanding the product suite even further through Square Installments, which enables its sellers to offer purchase financing to their own customers.
In its own second quarter earnings, Shopify reported that its Shopify Capital product, which it launched last April, had advanced more than $95 million to businesses as of July 31, and had advanced twice as much cash during the second quarter as it had in the first.
Armed with truckloads of data on their clients’ business, payment facilitators are in an ideal position to assess the risk of lending to them.
PayPal’s purchase of Swift Financial will provide them with additional outside data as well, the company said.
“Swift’s technology will allow us to assess supplemental information to more fully understand the strength of a business and provide access to complementary financing products to meet the needs of small and mid-sized businesses. With these capabilities, Swift Financial will help accelerate our efforts to democratize financial services by enabling PayPal to further fill the small business funding gap,” the company said in a statement.
PayPal has already provided more than $3 billion in funding to 115,000 businesses through its PayPal Working Capital program, the company said. It called the program a “strategic offering for PayPal, which drives merchants’ sales growth, increases processing volume, and reduces merchant churn.”
PayPal expects to close the acquisition of Swift later this year.