PayPal Small Business Review 2017

Aja McClanahan

Contributor at Fundera
Aja McClanahan is a financial writer who blogs regularly at www.principlesofincrease.com and also writes for other online publications covering personal finance, entrepreneurship, travel and general lifestyle topics.

PayPal was one of the first companies to bring convenient digital payment options to the masses when it debuted in the late 1990s. Since then, many competing and complementary options have surfaced to create seamless e-commerce experiences for millions of web users. PayPal has evolved too, with a variety of options for helping small business owners with online and offline transactions.

And it’s not just for eBay buyers and sellers anymore. It’s turned into a robust suite of payment solutions for small businesses and large enterprises alike. See if any of these PayPal offerings could be a good fit for your payment processing needs.

PayPal Business Account Features

PayPal realizes that small businesses depend on the payment processor’s ability to collect money quickly and easily on their behalf. For that reason, they’ve rolled out business account features that cater to small business and solopreneurs.

According to the website, here are a few benefits of creating a PayPal business account:

  • Do business under a company or group name
  • Accept all payment types for low fees
  • Accept payments from customers without PayPal accounts
  • Send and receive payments with members in 203 countries and regions
  • Implement subscription payments for your content or services
  • Multiple logins give employees limited access to your PayPal account

By having a business account, you can also take advantage of other merchant features, like complete point-of-sale (POS) payment systems and full-scale payment gateway solutions specifically designed for the needs of small business owners.

Payment Processing

This is what most people are familiar with in terms of PayPal services. You can use PayPal to either send or receive payments. The good news is that this service is pretty universal and offers integrations galore. Nowadays, it’s very common in the checkout process to see PayPal as an option.

Pros:

  • Quick setup options make it so you can be in business in a matter of minutes
  • Easy-to-create buttons go directly on your website to accept payment for any product or service
  • PayPal is a trusted payment method with high conversion rates—customers know they can request mediation if something goes awry with the transaction. Plus, most people remember their PayPal login off-hand versus their credit card number.
  • Downloadable log to import transactions to your accounting system

Cons:

  • The PayPal merchant fees price matrix gives you an idea of all the fees (which are all different based on varied scenarios)
  • PayPal rates can be a tad higher than traditional credit card processors
  • Setup is quick, but the risk of getting shut down is high. Not ideal for high volumes of business due to their sensitive fraud management protocols.

Mass Payments  

PayPal mass payments is an incredibly convenient way to send payments to up to 5,000 people in one fell swoop. This features works from the PayPal website or from the PayPal API (application programming interface).

This situation is helpful for merchants who have to pay a large number of people without cutting checks or initiating ACH drafts (who wants to store a bunch of routing and bank account numbers, anyway?). In terms of who would use this feature, think of someone who has to make monthly affiliate payments to hundreds or thousands of affiliate partners (people who sell a product and receive a sales commission).

Pros:

  • Quick, lower-risk way to transfer funds to many people at once
  • Lower fees for both the sender and receiver (free for mass pay recipients)
  • You can send payments in different currencies and countries

Cons:

  • Canceling an individual payment can be tricky if they’ve claimed the payment already
  • Payment recipients must have a PayPal account to retrieve funds
  • Payers must go through an approval process to use this feature

Invoicing

PayPal also offers a service for creating invoices and receiving payments through the same invoice. The invoices are customizable with templates along with the option to add your logo, company information, etc. Once the invoice is created, it’s sent via email to the recipient, who can either pay it from their own PayPal account or a credit card.

Pros:

  • Quick, easy setup with the potential for getting paid quicker
  • The ability to offer financing to clients (you get paid up-front, but the client has the option to spread payments out)
  • Keeps a record of invoice status

Cons:

  • Not a full accounting solution; you may need to reconcile between accounting systems
  • Invoices sent via email could be caught up in spam filters
  • Fees for larger invoices can get hefty according to PayPal’s standard fees—2.9% + $0.30 per transaction

Integrations

PayPal is such an industry-standard payment solution that many e-commerce companies use PayPal payment services to facilitate transactions. PayPal has well-documented software development kits (SDKs) along with support for developers. This means that if you are looking to support an application or any platform that requires digital payments, there’s usually a way to integrate PayPal into the mix.

Pros:

  • PayPal APIs integrate with a number of platforms for everything from e-commerce to e-learning, forms processing, and more.
  • The SDK supports several programming languages including Java, PHP, Node, Python, Ruby, and .NET
  • The widespread use of PayPal along with SDKs in several languages means you won’t have much trouble finding a developer to create or tweak your integrations

Cons:

  • Not for the faint of heart. Requires use of programming languages and the knowledge of development protocols like testing in a sandbox environment.
  • Creating an integration can be pricey if you have to hire out the work. Plus, there could be maintenance costs for ongoing updates
  • Creating and using integrations requires extensive planning. Be prepared to spend time and energy on business analysis before diving into developing an integration with PayPal payment services.

Payment Gateway Services

PayPal’s Payflow payment gateway is another service that small businesses can use to process payments. Payflow, formerly Verisign, operates as a PayPal company. It’s similar to other gateway services like Authorize.net or First Data.

Many small businesses are familiar with using PayPal as a payment processor but not as a payment gateway. In a nutshell, a payment processor handles transactions by transmitting data between a buyer, the merchant bank, and the acquiring bank (the buyer’s bank). Payment processors can also provide equipment to accept credit card payments in person, but the focus for payment gateways are mainly on online transactions.

The payment gateway makes it so businesses can accept card payments directly from a website. Security is a major concern here, so a payment gateway provider has to be familiar with and able to comply with fraud prevention protocols for online payment processing.

Pros:

  • Works with a variety of merchant accounts, major processors, and shopping carts
  • Two service-level options: $0/month with Payflow Link or $25/month with Payflow Pro
  • Higher online conversions with PayPal checkout option

Cons:

  • The gateway’s fraud protection service restricts options for which payment processors a business can actually use in tandem with their product
  • There are costs for additional services like advanced fraud protection, recurring billing, and buyer authentication
  • Although a variety of currencies are supported, the PayPal’s payment gateway product is available in only four countries: U.S., Canada, Australia, and New Zealand

The Bottom Line

PayPal offers an extensive suite of payment solutions for small businesses that are great for anyone needing to start nimbly and inexpensively. From quick-start buy buttons to full scale POS solutions and mass payments, PayPal enables the small business owner to compete on the level of larger operations.

However, getting started quickly and easily also means a business could pay on the back-end in higher transaction fees and for nonstandard additions to their payment services.

If you’re just starting out and haven’t had a chance to get a business loan or business funding, the trade-off might be worth it just to get going quickly. As your small business gets bigger, it’s a good idea to go back and reevaluate your options to see if you might get better terms and transaction fees. But with all the features, you may also find that PayPal still works and is a good fit for your business model.

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

Aja McClanahan

Contributor at Fundera
Aja McClanahan is a financial writer who blogs regularly at www.principlesofincrease.com and also writes for other online publications covering personal finance, entrepreneurship, travel and general lifestyle topics.

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