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

PayPal has been around for decades and is still one of the most well-known names in online payments. Many small business owners turn to PayPal because it's quick to set up, easy to use, and trusted by customers.

It integrates with popular e-commerce platforms, accounting software, and invoicing tools like Shopify, WooCommerce, or QuickBooks, so it can easily fit into your existing setup. That's a big plus for busy entrepreneurs who don't want to juggle too many separate systems.

Whether you're selling products online or in person, PayPal offers tools that help you get paid. But while it has plenty of advantages, it's not the perfect fit for every business.

Here's a closer look at the benefits and drawbacks of using PayPal as your payment solution.

Pros of Using PayPal for Small Businesses

1. Simple Setup and Versatile Payment Options

Getting started with PayPal Business is straightforward. You can start accepting payments online in just a few steps. PayPal works with major credit and debit cards, bank accounts, and PayPal balances. You can even let customers pay in their local currency—or with cryptocurrency if that's something you want to offer.

2. Accept Payments Online and In Person

If you run an online shop, PayPal Checkout makes it easy to accept payments through your website. The checkout experience adapts to each customer and shows them payment options that are most relevant to them. For in-person sales, PayPal also has solutions like the PayPal Zettle app and card reader. It supports chip cards, contactless payments, and traditional swipes, so you can use it in a retail store, at events, or on the go.

3. Built-in Invoicing and Recurring Payments

If you send invoices to clients or offer subscriptions, PayPal has built-in tools to help you manage billing. You can create and customize invoices, set up recurring payments, send reminders, and even accept bank transfers. It's all included with your business account—no extra monthly fees or complex setups.

4. Access Your Money Instantly

Unlike some payment processors that take days to transfer funds to your bank, PayPal gives you immediate access to your balance. You can use the money right away to pay vendors, contractors, or business expenses. With the optional PayPal Debit Mastercard, you can also spend or withdraw cash anywhere Mastercard is accepted, and even earn 1% cashback on eligible purchases.

5. Business Loans and Customer Financing Options

PayPal also offers financing for both business owners and their customers.

For your business, you can apply for a PayPal Business Loan or a PayPal Working Capital loan. The approval process is quick, and funds can be available as soon as the next day.

For your customers, PayPal provides Buy Now, Pay Later options. This allows shoppers to pay in four interest-free installments while you get paid in full upfront. It can help increase conversions, especially for larger purchases.

Cons of Using PayPal for Small Businesses

1. Account Holds and Frozen Funds

One of the biggest downsides of PayPal is the risk of having your account limited or your funds frozen—especially if there's a customer dispute or something triggers PayPal's fraud detection system. While it's meant to protect buyers and sellers, it can be frustrating for small businesses that rely on steady cash flow. It's a good idea to keep clear communication with customers to help avoid complaints that lead to account issues.

2. Complicated and Varied Fees

PayPal's fees can be hard to figure out. The amount you pay depends on what kind of transaction you're processing, where your customer is located, and whether you're using online or in-person tools. For example, online payments might cost 2.9% + a fixed fee, while in-person payments through Zettle may have different rates. If you sell internationally, there are additional fees for currency conversion and cross-border transactions.

3. Not Suitable for High-Risk Businesses

PayPal doesn't support businesses that fall into certain high-risk categories, such as those selling CBD products or anything age-restricted. It also doesn't offer advanced age verification tools or support for all e-commerce platforms. If your business operates in a niche with higher risk or specific legal requirements, PayPal may not be the best fit.

4. Frequent Target for Scams and Phishing

Because PayPal is so popular, it's also a common target for cybercriminals. Phishing emails pretending to be from PayPal can trick business owners or customers into giving away sensitive information. While PayPal does use strong security measures, it's important to stay alert and know how to recognize scams.

5. Customer Support Needs Improvement

Many small business owners have voiced frustration with PayPal's customer service. Some report long wait times, difficulty resolving disputes, or issues with frozen funds. While support is available through phone, email, and social media, the quality of help can vary depending on the issue.

How to Avoid PayPal Account Freezes

One of the biggest frustrations small business owners face with PayPal is having their account suddenly limited or funds held. This can happen when there's unusual activity, a spike in sales, or a customer dispute. While not always avoidable, there are a few things you can do to reduce the chances:

Verify your account details early. Make sure your business name, bank account, and contact info are up to date and fully verified.
Track and ship orders promptly. Add tracking numbers to PayPal as soon as you send out products. This helps resolve disputes faster.
Keep communication open with customers. Encourage them to reach out to you first if there's an issue before opening a PayPal case.
Avoid big changes in sales volume. If you suddenly get a lot of high-value transactions, it can trigger PayPal's fraud filters. If you're running a big promotion or sale, consider giving PayPal a heads-up through their support team.

Protect Your Business Beyond Payments

No matter which payment platform you use, keeping your business safe goes beyond transactions. Cybercriminals often target small businesses through phishing emails, fake invoices, and malware disguised as payment notifications. That's why it's just as important to secure your devices, email accounts, and business data. Bitdefender Ultimate Small Business Security offers complete protection against scams, breaches, and digital threats—with tools like advanced antivirus, scam detection, email protection, and a smart Scam Copilot that helps you spot suspicious messages instantly.

Check out our plans for small businesses.

FAQs

Should I use PayPal for my business?

PayPal works well for freelancers, service-based businesses, and online shops that want a simple, trusted way to accept payments. If your business sells physical products, takes online bookings, or offers subscription services, PayPal can handle it. But if you're in a high-risk industry or need custom checkout features, it might be worth exploring other options.

Is PayPal safe for small business owners?

PayPal uses encryption, fraud detection, and other security tools to help keep transactions secure. But no system is perfect. It's important to watch for phishing emails and set up extra protections like two-factor authentication.

Can I use PayPal for international sales?

PayPal supports payments in multiple currencies and lets you accept orders from customers in other countries. Just keep in mind that extra fees may apply for currency conversion and cross-border transactions.

What happens if a customer files a dispute?

If a buyer reports a problem—like a missing or damaged item—PayPal may temporarily hold the funds while reviewing the case. You'll have a chance to respond and provide proof (like tracking info). Quick replies and clear records help resolve disputes faster.