Dec 21, 2016 | By Tess
Czech Republic-based 3D printer developer Prusa Printers published a warning to other small but quickly growing businesses after online payment company PayPal froze over $1 million of its funding. The company, which unveiled its newest RepRap-style Prusa i3 MK2 3D printer in May of this year, says it can no longer send money, transfer it to another bank, or even refund clients.
Sadly, this is not the first time a 3D printer company has suffered from having funds frozen by PayPal, as earlier this year Gizmo 3D Printer announced that the payment service was holding $80,000 of its Indiegogo crowfunding money for an unspecified amount of time. According to Gizmo, and now Prusa, PayPal’s current system is not well set up for crowdfunding or for small but fast growing companies, so other startups should take heed.
According to a post by Prusa founder Josef Průša, PayPal has frozen the funds largely because the 3D printer manufacturer has seen a quick growth in funding and does not ship its goods out immediately (as is becoming the norm for many tech startups). Of course, PayPal’s methods are in place to protect the consumer and to stop as much fraud as possible, but the lengths of their limitations in these cases do seem unproductive.
Josef Průša
According to Průša, his whole experience with PayPal has been a logistical nightmare. He writes: “Right after you sell more than $100,000 monthly, everything above that will be held for 21 days. Once a month you can ask for increasing the release amount, but you will be ignored for a couple of months. They will eventually increase it by $50k and you have to ask again and again …”
Once they do increase the release limit, they also institute what they call a “rolling reserve”, which means that they withhold a certain percentage of the funds for a 60 day period. When the rolling reserve goes beyond several hundred thousand dollars, however, PayPal apparently blocks all funds completely. “They even block the option to refund customers who ask for it, for example when they change their minds during waiting,” added Průša.
According to the company, it was aware there would be some bumps in dealing with PayPal after the release of the MK2 3D printer, so they warned the service about a significant growth in sales and sent them the Make magazine edition that explained the new 3D printer. Still, this did not make a difference, and PayPal insisted on seeing historical records rather than considering how many people work for Prusa, whether they are shipping their products on schedule, and how many parts they need to stock.
Prusa i3 MK2 3D Printer
“Right now we don’t have any new information but last information was that they will release funds for printers we shipped. Because our delivery dates are 5-6 weeks it might seem like a reasonable thing but customer can dispute undelivered goods for up to 180 days on PayPal. What Paypal is doing right now would make sense only if we are about to go bankrupt or running away with the money,” writes Průša.
Fortunately, for anyone who has bought a new Prusa i3 MK2 RepRap 3D printer, it is not as though the company is going under after this set-back. Having prepared for its growths in many ways, Prusa Printers ensures that it will still be able to meet orders without too much difficulty. The company’s long, wary post, therefore, is meant more as a warning to other startups who depend on PayPal for access to their funds.
The post also lays out a few steps that can be taken to avoid future problems with PayPal, including working with various payment processors, transferring funds to your bank account as often as possible, and having a backup processor prepared.
Posted in 3D Printer Company
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Should we assume that PayPal is using that "hold" time to use the money for their own investment money making? Some companies solely make their money that way. PayPal may say it is for customer protection, but I'd be curious to see what they've done with the funds.
sam wrote at 12/23/2016 2:23:59 PM:
avoid paypal by all means, stopped using paypal as payment processor about 5 years ago. they are stuck in their own monopoly position, however today it's no longer needed to just stick with paypal. f them, let them bleed and stay away from it as a business and all customers will follow suit. they practically begged us to stay by lower all sort of fees and commision but they are just incompetent as a company.
Ian wrote at 12/22/2016 8:12:44 AM:
And of course, when they do release the money, what about all the interest that those funds accumulated while being held?
Coso wrote at 12/21/2016 11:45:56 PM:
Open further paypal accounts and shift the payments. Freezing problem solved.
Richard. wrote at 12/21/2016 2:32:05 PM:
Personally, I would recommend not working with PayPal if at all possible. While the buyer protection plan sounds good on paper, in practice it means that PayPal errs on the side of the purchaser. Crooked buyers have learned how to game the system to rip off sellers. PayPal’s policies helps crooked buyers. I was ripped off at a time when I desperately needed the money by two crooked buyers when I tried to sell a collector’s item camera. PayPal finally released the funds minus a fee from one of the crooked buyers only after I learned that the purchaser was operating under a stolen identity. I contacted the victim who didn’t know that the identity was stolen, whose lawyer then contacted PayPal to shut down the account. The other crook got his money back when PayPal didn’t follow its own internal policies. In short, PayPal ripped me off. It was a nightmare that lasted over four months. I have not dealt with PayPal, nor its parent company at the time eBay, since. Now if a company says it accepts payments only through PayPal, I don’t buy from that company. In short, don’t deal with PayPal if you can avoid it. Especially if you are a seller. That’s my experience.
Alan Gallery wrote at 12/21/2016 11:54:21 AM:
When I buy my next i3 from Prusa I will not be using PayPal. Nor will I use paypal for large payment I do not want the bloodsucking bastards at paypal to get to hold on to my money and prevent growing tech companies like Prusa from getting it. BOYCOT PAYPAL NOW!
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