Is PayPal Good for Small Businesses?

PayPal can make it easy for a small business to accept payments, send invoices and get paid by customers around the world. But convenience isn't the only thing to consider. Fees, disputes, account holds and PayPal scams can all affect your business.

Here's what to know before deciding whether PayPal is right for yours.

Key takeaways:

PayPal can be a convenient way for small businesses to accept payments, send invoices and sell internationally.
Fees, disputes and potential account holds are important drawbacks to consider.
PayPal's popularity also makes it a frequent target for phishing, fake invoices, payment scams and impersonation.
Always verify payments directly in your PayPal account rather than relying on an email, text or screenshot.
Protect the email accounts, devices and employees connected to your business payments, not just the payment account itself.

Why do small businesses use PayPal?

One of PayPal's biggest advantages is convenience. Setting up a business account is relatively straightforward, and you can accept payments without building a complicated payment system of your own. PayPal also integrates with popular e-commerce platforms, accounting software and invoicing tools, making it relatively easy to add to a setup you already use.

Depending on your business and location, you may be able to use PayPal to:

Accept credit and debit card payments
Get paid through your website or online store
Send invoices to clients
Set up recurring payments or subscriptions
Accept payments from customers in other countries
Take payments in person

For a freelancer, consultant, online seller or very small business, having several of these options in one place can make getting paid simpler.

But there are some trade-offs.

What are the downsides of PayPal for small businesses?

Fees can add up

PayPal's fees vary depending on how a customer pays you, the type of transaction and where the customer is located. Currency conversion and international transactions can add additional costs. For a business processing a large number of transactions, even relatively small differences in payment processing fees can add up. It's worth checking the fees that apply to your business rather than assuming PayPal will be the cheapest option.

Your funds may not always be immediately available

PayPal may place holds on payments or limit an account in certain circumstances, such as unusual activity, disputes or changes in transaction patterns. For a small business that relies on incoming payments to cover inventory, contractors or other expenses, temporarily losing access to funds can create a cash-flow problem.

Customer disputes can take time to resolve

A customer can dispute a transaction if, for example, they say an item wasn't delivered or a transaction wasn't authorized. If that happens, you may need to provide receipts, shipping information, tracking numbers or communication with the customer. Good record-keeping matters, particularly if you sell physical products.

PayPal may not work for every type of business

PayPal has restrictions on certain products, services and business activities. If you operate in a regulated or higher-risk industry, check PayPal's current acceptable-use rules before relying on it as your main payment provider.

There is another drawback that's less about PayPal itself and more about its popularity: scammers know that millions of people and businesses use it.

What PayPal scams should small businesses watch out for?

If you run a business, you're probably used to receiving invoices, payment confirmations, account notifications and messages from customers. Scammers take advantage of exactly that. A fake PayPal message arriving in the middle of a busy workday may not look particularly unusual, especially if you're already expecting payments.

Here are some of the scams worth knowing about.

Fake PayPal payment notifications

A scammer may claim they've paid for a product or service and send you what appears to be a PayPal payment confirmation. The message may look convincing, but the payment doesn't actually exist. If you ship the product or provide the service without checking your account first, you may never get paid. Don't use an email, screenshot or message from a customer as proof of payment. Log in to PayPal directly and check that the transaction appears in your account.

PayPal phishing emails and texts.

You may receive a message claiming there's a problem with your PayPal account, a suspicious login has been detected or your account will be restricted unless you act immediately. The link takes you to a fake PayPal login page designed to steal your credentials. For a business owner, losing access to a PayPal account could expose more than one transaction. An attacker may gain access to payment information, customer details or money in the account.

Fake invoices and money requests.

Scammers can send unexpected invoices or payment requests and hope recipients pay without checking them carefully. Some may also include alarming messages or phone numbers, encouraging you to contact supposed customer support to dispute the charge. The number actually belongs to the scammer.

An invoice or money request doesn't necessarily mean you owe someone money. Verify who sent it and what it's for before paying or contacting anyone.

Overpayment scams.

A supposed customer may tell you they accidentally paid too much and ask you to send the difference back. The original payment may later turn out to be fraudulent or get reversed, leaving your business out the money you returned.

Be particularly cautious when someone sends more money than expected and then urgently asks you to refund part of it using another payment method.

Fake PayPal customer support.

Scammers may impersonate PayPal support through emails, phone calls, fake websites or search results. They might ask for your password, verification codes, financial information or remote access to your computer.

If you need help with your account, contact PayPal through its official website or app rather than using contact details provided in an unexpected message.

How to use PayPal safely for your small business

You can't prevent every dispute or fraudulent attempt, but a few habits can make your business account harder to compromise and help you spot scams sooner.

Secure your PayPal account. Use a strong, unique password and enable multi-factor authentication. Don't share login credentials between employees.

Protect the email account connected to PayPal. If someone gets into your business email, they may be able to intercept security messages, impersonate you or use it to target other business accounts.

Verify payments inside PayPal. If a customer says they've paid you, check your account directly. Don't rely on an email, text, screenshot or forwarded payment confirmation.

Be suspicious of urgency. Messages warning that your account will be suspended immediately or asking you to refund money quickly are worth checking carefully before you act.

Check invoices and payment requests. Make sure you recognize the sender and understand what you're being charged for.

Keep transaction records. Save invoices, customer conversations, receipts, shipping information and tracking numbers. They can be important if a payment is disputed.

Review your account activity regularly. Look for transactions, account changes or login activity you don't recognize.

And make sure employees who handle orders, invoices or payments know what PayPal phishing and payment scams look like. An attacker doesn't necessarily need to hack PayPal itself if they can convince someone in your business to hand over a password or send money.

How to protect your small business when using PayPal

Using a secure payment platform is only one part of protecting your business money. Cybercriminals can target the email account connected to PayPal, steal an employee's credentials through phishing, send fake invoices or compromise a device used to manage business payments.

That means protecting your payment process also means protecting the people, accounts and devices around it.

Bitdefender Ultimate Small Business Security helps small businesses protect devices and accounts against scams, phishing, malware and other digital threats, while giving business owners visibility over their security from one dashboard.

Try Bitdefender Ultimate Small Business Security free for 30 days. No credit card required.

FAQs

Is PayPal good for small businesses?

PayPal can be a good option for freelancers, online sellers and small businesses that want a convenient way to accept payments without a complicated setup. Whether it's right for your business depends on factors such as fees, transaction volume, where your customers are and which payment features you need.

Is PayPal safe for small businesses?

PayPal has security and fraud-prevention measures designed to protect transactions and accounts, but businesses still need to protect their own credentials, devices and email accounts. Using multi-factor authentication, a unique password and good phishing awareness can reduce the risk of account compromise.

What are the disadvantages of PayPal for small businesses?

Potential disadvantages include transaction and currency-conversion fees, account holds, customer disputes and restrictions on certain business activities. PayPal's popularity also means its name is frequently impersonated in phishing and payment scams.

Can PayPal freeze a business account?

PayPal can limit accounts or hold funds in certain circumstances, including unusual account activity or disputes. Keeping your account information current and maintaining good transaction records can help you respond if PayPal requests additional information.

How can I tell if a PayPal payment is real?

Don't rely on a payment confirmation email, text or screenshot from a customer. Log in to your PayPal account directly and check whether the transaction appears there before shipping products, providing services or sending money back.

Can I use PayPal for international business payments?

PayPal supports international payments and multiple currencies, which can be useful for small businesses with customers abroad. However, cross-border transactions and currency conversions may involve additional fees.

Is PayPal Good for Small Businesses? Pros and Cons to Know