Small business owners used to go to their local bank to get a loan. Now they are turning to the same Silicon Valley companies that process their transactions–services like PayPal and Square–for access to credit. Since 2013, PayPal has issued over $3 billion in loans. Since 2014, Square has issued $1 billion.
And the competition is heating up. Today PayPal announced that it has agreed to acquire Swift Financial, which provides cash advances and loans to small businesses, for an undisclosed amount. The deal paves the way for PayPal to offer larger loans to larger businesses.
In parallel with this move, Square (and Amazon) continue to expand their credit offerings. When small businesses have more cash, they can generate more growth. And that’s good news for any company that takes a cut of each transaction.