About a year ago Hacker Paradise, a company who organizes trips around the world for developers, designers, and entrepreneurs who want to work and travel at the same time, decided to use PayPal as their primary payment solution.
But with vendors all over the world in places like Bali, Barcelona, Thailand, and Tokyo the company´s account got flagged by PayPal who after a month chose to freeze all of the money in the account, around $30,000.
Hacker Paradise reached out to PayPal and were able to get $10,000 released. But according to Casey Rosengren, facilitator at Hacker paradise, PayPal said they needed to hold on to the remaining money for up to six months.
– We run a low-margin ops-heavy business, so we started scrambling to make up the gap in our cash flow. With personal funds and a healthy dose of luck, we managed to keep most our vendors happy, says Casey Rosengren.
Credible Enough for a Loan
A few months later the company noticed something interesting. Advertisements started popping up on their PayPal account for PayPal´s Working Capital. A program launched in 2013 that offers loans for small businesses and has lent more than $1 billion to over 60,000 small businesses in the US, UK and Australia, according to CNBC.
After a quick check Hacker Paradise found out that they were offered a loan based on their PayPal volume.
– On one hand, PayPal was saying that our account was too risky for them to release the $20,000 they’d taken as collateral. On the other hand, they were saying our account was credible enough to offer us a loan, says Casey Rosengren.
From PayPal to Stripe
The company reached out to PayPal again and asked how this was possible and if it was some kind of misstake. After a few weeks the payment company sent an email saying it was not a misstake and that they still were eligable for a loan. Even if a big part of the company´s funds were still frozen.
The frozen money has now been released and Hacker Paradise now use Stripe as their primary payment solution instead.
– In our case, we were able to bridge the gap with personal funds in order to stay out of the red. However, a young, cash-poor company could be left with no other option than to take PayPal up on their offer. PayPal causes a cash-flow crisis and then offers to fix it, says Casey Rosengren.