SAN JOSE, CA - Woodworkers using PayPal for retail transactions will be offered a new way to secure funds, as the online payment service enters the online business loan arena.

PayPal Working Capital, the latest service in the growing online money lending market, offers existing PayPal merchants with a healthy cash flow the option of borrowing as much as 8% of their annual PayPal volume up to a maximum of $20,000.

The hook in the service: the cost to the entrepreneur is presented as a single number, void of set up and prepayment fees.

Woodworkers often buy and sell using PayPal, especially for items sold at public exhibitions and online sales to consumers.

Repayment of funds occurs as an automatic deduction, cutting the risk of late or forgotten payment charges. PayPal Working Capital’s set fee is repaid automatically, as a deduction of 10-30% of incoming receipts, until the amount is paid. The greater the percentage of payback, the lower the fee. Once the balance is paid off, business owners can apply for a new loan as often as needed.

PayPal already offers factoring of receivables, a variations on the structure to the Working Capital offering.

Simplifying the process is the fact that no credit check is involved, which means loan won't adversely affect the merchant's credit rating be recording that a credt check has taken place. PayPal says loan application approval can take as little as five minutes.

PayPal, a unit of eBay, hasn't specified how many merchants will qualify for PayPal Working Capital's initial test run, which is set to go through the end of the year.