Witheld funds have potential to cause cashflow issues in start up business

andropod
Contributor
Contributor

Hello

 

I have been a long time member of eBay and Paypal- since 2000.

 

At the start of the year we launched a new business making bespoke wall panelling and eBay has proven to be a great way to reach customers and make sales.

 

All was going well until about 2 weeks ago when Paypal started putting payments on hold from eBay clients. This is not eBay's doing.

 

The big issue with this is that the panelling is bespoke, made to order to customer specifications. This means we need to buy the wood, pay all bills and pay for shipping up front. The customer pays via eBay 'buy it now' and previously we were receiving the money straight away, which was helping to fund the provision of the order. In the eBay listing it states that we take 10-15 working days to make the panelling and ship- customers are fine with this as they understand these are bespoke products. Shipping is costly, up to £40 per order (over 10% of the order value).

 

Paypal are now effectively meaning we are having to fund many orders out of pocket to keep the business going.

 

We probably make about 50% margin on the products, but this is meaningless if we do not receive the money until weeks after sale. The cashflow implications of Paypal witholding funds could be catastrophic on the business moving forwards.

 

Ebay, Paypal, the timber merchants and the shipping companies all take their money up front or soon after.

 

I understand we are new to this but we have shipped over 25 orders since the start of January within the agreed schedule with clients and we have 100% positive feedback. So far no customers have raised any issues. We have great handmade products our customers love!


Why then are all new transactions being withheld on the basis of 'high risk'?

 

Paypal are currenly holding £2k+ of monies which we will badly need for stock and other bills, for making the orders in fact that they are witholding the money for. This policy has meant we are foregoing salaries (living from savings)  to pay for stock and pay bills related with the manufacture and provision of orders, effectively we are loaning money to Paypal! This is crazy and there is no justification for this behaviour. We don't currently have a choice of which payment provider to use but we can assure Paypal if we did we would move straight away. Please can you review our account and look into this and release some funds so we can actually keep the business going?

 

The business is turning over in excess of £2000.00 per week, so for each week that goes by we are at least £1000 out of pocket- this is supposed to be salary.  Yes, we are fulfilling orders but soon we will run out of funds in the business and will be funding it from savings to keep up with orders received since Paypal ut the blocks on payments. Paypal sort it out, far from helping a small business you are putting us out of business

 

 

 

 

 

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andropod
Contributor
Contributor

So I have raised this with Paypal support- which is not that easy to actually do. The messaging system is basically a bot which dishes out pre-formatted responses to common questions. Seems that talking to the first line of customer support may as well be a bot- whilst they are at least human they are so restricted in what they can do or say.

 

The matter is being investigated.

 

In the mean-time we have over £2,500 of payments on hold and this is growing with three of these payments totalling nearly £900.00 on hold despite the fact that the orders were delivered last week with valid tracking numbers that are easily vertifiable online. So it seems providing tracking has no benefit at all. No end in sight right now.

 

I did not plan to run this business on the understanding that more than 50% of our turnover would be held onto by the payment services provider for an 'indefinite' period. They say 21 days but some of the payments owed to us and on hold are older than that.

 

What irks is that as we are selling new products in the UK to UK customers that are fully covered by the UK Sales of Goods Act, in addition the buyers will likely be using their credit or debit cards to make the purchases, so they are protected by their banks and card issuers under UK legislation too, plus eBay offer seller protection. There are layers and layers of protections already there.

 

Why then does Paypal think it also has the right to weigh in and offer the 'protection' of witholding the money?

 

A Paypal rep told me it was to stop the customer just taking the money back off me. This wouldn't happen anyway would it?

 

I mean, if I buy something from a retailer like John Lewis and have it delivered (with proof of delivery obtained by them) I can't then say I want a refund and get it back from my bank - and keep the goods. The bank and John Lewis wouldn't entertain that. I'd need cause to request a refund and I'd need to request it under the terms I bought the goods from the retailer, who would have the right to revert to the strict letter of the law if they wanted. So Paypal holding onto our money doesn't protect us at all, it damages us.

 

Paypal for me is just a payment service provider who has been pushed onto us by eBay. We have no other option but to user their services, at least not unil eBay allow us to user their managed payments service. This means we are stuck with Paypal.

 

For me they are way out of order, they have crossed a line they didn't need to cross. Our customers buy from us know what they are getting. 49 orders in since we started and not a single return, complaint or issue says we are doing all the right things. We are operating our business responsibly and legally (as we have to). Paypal however are acting like a bully, they have the contractual right to withold our money so they do, whatever we say or do about it. We need eBay right now in our business, which means we need Paypal too.

 

I've written to Paypal stating our issues and the effect of their current policy. I honestly don't expect them to do anything because they probably don't need to. We are a speck of dust to them, insignificant and they have the power to do what they want in this case. So, in all likelyhood we will be funding our business from savings for the forseeable future. We've had to issue new terms to new customers buying our goods to give us more time to cope with the cashflow, this in turn has led to a slight downturn in trade as the delivery times are about a third longer than they were and not as competitive. We are throttling our business so we can afford to pay our bills, fulfil the orders we get and keep the lights on. All because of Paypal.

 

At some point in the future we will begin to see the blocked payments come through (Paypal surely cannot hold on to them forever). Then we will be able to start paying ourselves a salary and covering our bills- but the business will still be growing less strongly than it was and it may take months if not years to get past the impact. Also, at some point we will hopefully outgrow eBay as our main sales channel and we'd no longer be forced to use Paypal, either that or eBay will get Managed Payments sorted and we migrate onto that. That day cannot come soon enough.

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