# PayPal offers small businesses simple Bill Me Later financing option

PayPal (s ebay) is opening up its Bill Me Later service to small and medium online businesses, enabling them to offer free no-interest financing for six months for all purchases of $99 or more. Bill Me Later will give small business owners a way to increase sales conversions and boost order sizes going into the holiday season. And it expands the utility of Bill Me Later to merchants who have never been able to offer instant financing. For merchants who participate, they will be able to offer Bill Me Later as an option at checkout and will get paid right away from PayPal. There is no upper limit for how much people can finance using Bill Me Later, and the transaction is approved or denied within about one minute. If a consumer takes longer than six months to pay off their purchase, they will pay an annual percentage rate of 19.99 percent. PayPal is also providing business owners with 18 different types of banner ads that can be easily inserted into their home page or check-out page to highlight the Bill Me Later option. This should be helpful for consumers who might be a little hesitant to make bigger purchases due to the tough economy. For businesses, offering Bill Me Later could push someone to add a few more items to their shopping carts if they’re short of a the$99 threshold. Forrester Research found that 43 percent of Bill Me Later sales are in addition to regular online sales and offering Bill Me Later boosted average order sizes by as much as 75 percent.

Previously, Bill Me Later was included as a funding source in the PayPal wallet, but it was almost always used by large retailers and enterprise customers. The financing offers were not consistent from one retailer to another. And merchants didn’t have a simple way of advertising the Bill Me Later option.

PayPal has been testing Bill Me Later with some small merchants and some are reporting larger average purchases through the service and a bigger percentage of sales flowing through PayPal as well.

By expanding the use of Bill Me Later, PayPal continues to show how it can become an alternative to traditional credit cards. And it demonstrates how PayPal’s purchase of Bill Me Later in 2008 is now paying off for the online payment giant. Morgan Stanley noted in March that Bill Me Later improves PayPal’s transaction margins because it’s paid off through ACH transfers or check; it generates substantial income through interest and helps eBay monetize its off-shore cash, which it uses to cover Bill Me Later transactions.