How I survived after PayPal froze my merchant account
Ben Stefanescu and Adam Rowson started online department store eSold.com.au with the idea of mixing two business models: Selling quality brand name products on a 24-hour model along with the usual department store set-up.
The company has been a success, turning over $14 million. But in the company’s early days, Stefanescu says the company’s accounts were frozen by PayPal – and it took some careful negotiating and clever tactics to sort the whole mess out.
How’s eSold been growing lately?
It’s unbelievable, flat out. We’re growing quickly at the moment, with 20% month-on-month without any hesitation in the last two months, but we had a big growth spurt. So that sort of skewed things.
We’ve grown close to 300% in the last six months, and we’re just growing through little growth spurts here and there. We’ve put on a lot more people. I think it’s good that we’re hiring people while at the same time companies in our industry are letting people go.
Can you describe what happened with your payment system and why it was shut down?
Well, the situation is that unless you’re a listed company that has five or 10 years of trading, you’re pretty much backed into a corner unless you’ve got some big backers. Even if you have a lot of money in your account – which we did at the time – and investors and so on, the banks just want to know your track record. And at the end of the day, you don’t have a track record unless you get up and running.
We were refused by four or five banks at the start, and that’s just for merchant facilities. Many of them said they wouldn’t do online stores unless there was a physical store. So they have a long way to catch up.
So that led you to PayPal. What was the problem?
We had set up an account with PayPal, but they told us we were turning over too much money. They were basically asking us, what’s going on? It was all happening too quickly, and they said they wanted to put a rolling reserve on our account for 90 days. That would have made us go under.
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