PayPal Working Capital is a merchant cash advance linked directly to your PayPal account.
What's the difference between a PayPal reserve and a hold?
There’s been a lot of discussion about PayPal reserves and holds recently. What PayPal does in practice has changed somewhat in the last couple of weeks, and we’ll be looking at that in another post later today. However, for the sake of clarity (and the people coming here from Google trying to find out what’s going on), here’s the difference.
PayPal put the entire payment for a transaction in reserve, and the seller does not have access to it. The seller must dispatch the goods as normal. The money is released by PayPal to the seller under one of the following conditions:
- the buyer leaves positive feedback
- delivery is proven by trackable means (money released 3 days later)
- 21 days have passed without a complaint, chargeback, reversal or other claim by the buyer
(PayPal have said that if negative feedback is left but there is no claim filed, the seller’s money will be released after 21 days.)
Holds used to apply only to new sellers and to buyers deemed by PayPal to be risky; this, it seems, is no longer the case.
PayPal hold a proportion of the seller’s turnover in reserve for 180 days. Typically this is 10% or lower, though we have heard of higher amounts.
Because this is a rolling reserve – in other words, they take a chunk of EVERY transaction you process – this means that PayPal will always hold a proportion of your payments in reserve, unless of course you cease trading or cease accepting PayPal payments. Once you have a reserve on your account, there are no stated circumstances in which it will be removed; we’ve certainly never heard of anyone getting one removed.
If your turnover increases, PayPal support have told one TameBay correspondent that they would actually *increase* the percentage of turnover held in reserve. Go figure that one.