• On Wednesday, 19th February between 10:00 and 11:00 UTC, the forum will go down for maintenance. Read More

Paypal Jumpstart/Collateral Reserve

diamondhands

Regular Member
Joined
Jun 8, 2014
Messages
270
Reaction score
214
Hello! Does anyone have any experience with Paypal Jumpstart reserve? What this is is basically Paypal is holding '$x' amount of money for unknown amount of time... And they're saying that I need to reach "$x" amount of money for another review.

Does anyone have any experience with this kind of reserve? I have tried to call PayPal for about 9 times, and each time I get a completely different response (one say it's for 6 months, others it's for 30 days, others until January....).
 
Most likley holds are for 6 months, as the dispute period is 120 days. However, they may want you to keep that reserve indefinitely, so i would assume that reserve is on hold forever if you move forward. If you stop using paypal, it should be released after the dispute period is over.

Theres just really no way to know, things can change, if you encounter a higher rate of reversals they may be inclined to up the reserve rate to hedge against that. I would assume its lost for planning purposes.
 
Thank you for your reply. For more context, this is basically what kind of message I got:
large
 
Copy/paste what it says:

Based on a review of your account, we've decided that reserves will be applied as follows:

- Rolling Reserve: 20% of the funds you receive each day will be held for 45 days in your 'pending balance' and will be added to your 'available balance' for your use or withdrawal after this period has elapsed. This process will continue on a daily basis. This rolling reserve will be eligible for review 180 days from the date of this email.

- Collateral Reserve: The collateral reserve amount of: $ x USD has been applied temporarily to your account. This amount will be eligible for review if the above reserve will build up the amount of $ x .

I'm a dropshipper. Basically, I believe I got it because of my chargebacks that have reached more than 1%
 
I heard they put a monthly holding reserve on dropshipper's accounts as they view it as a high-risk business.
 
Yes, I'm aware of that... It's really the biggest problem and actually what breaks my business right now is the unknown, and the fact that no one is able to say what exactly needs to be done, and if nothing - when I can expect another review or release of funds...
 
Copy/paste what it says:

Based on a review of your account, we've decided that reserves will be applied as follows:

- Rolling Reserve: 20% of the funds you receive each day will be held for 45 days in your 'pending balance' and will be added to your 'available balance' for your use or withdrawal after this period has elapsed. This process will continue on a daily basis. This rolling reserve will be eligible for review 180 days from the date of this email.

- Collateral Reserve: The collateral reserve amount of: $ x USD has been applied temporarily to your account. This amount will be eligible for review if the above reserve will build up the amount of $ x .

I'm a dropshipper. Basically, I believe I got it because of my chargebacks that have reached more than 1%
Ok so a rolling reserve is as said 20% of all funds held and released after 45 days.
However, there is also a collateral, which is the MINIMUM reserve.

Say you have a 4k collateral reserve.
Youre sales are 10k monthly.
So the rolling reserve will be 2k/month, and released after 45 days, however the next month you have another 2k (4k total now). 15 days into the new month you expect the previous 2k to be released, however since the collateral is 4k, noting will be released if it brings the collateral below 4k, so now 4k is your threshold.

The collateral reserve exists in case you have low sales volume, so that you are not able to cash out to 0 balance or similar every 45 days (remember the dispute period is 120 days so they still have risk after 45 days)

After 180 days you will be reviewed and if your chargebacks are lower, they will likely reduce each reserve,

What do you sell and what kind of volume? Country based? Your main problem isnt sales but cash flow I assume tied up in the reserve. What kind of margin is your product producing?
Ill be on for a while im high on closing a sale lol so lets chat and see what can be done. Changing processors is easiest but may not be available to you? Next we can look at how your business is set up or how to set it up to solve cash flow problems.
 
Thank you so much for your detailed answer here! I'm having some hard time understanding some of the things with collateral reserve itself (brain-fog is on... lol)

Basically, I can mention that in my case, my collateral reserve is $5000 (PayPal decided on that). So, as I understand, I will be able to cash out this money ONCE my active balance will reach $5000 in 45 days period, am I right?

Because right now I have this $5000 on hold + I have 20% on hold from previous sales.

I'm selling health related product, and I'm making around $30k/month, which is around 60% via Paypal payment gateway (another 40% to Stripe). So it brings me to ~ $17k/month to Paypal. And selling ONLY to United States, and my profit margins (COGS + Ad Spend) are ~33%.

My main problem right now is the uncertainty on when and how I can get this mentioned $5k reserve. For now, I'm not even quite sure if I'm up to use Paypal anymore but rather I'd like to do whatever it takes to get this reserve and pay for my employees, etc.
 
Last edited:
The only way to get out of this is to stay clean and do anything to prevent chargebacks in order to be eligible for "paypal funds now".

copy paste of description:
"The feature, dubbed Funds Now, transfers money to your PayPal account "within seconds" of a completed sale - even if there's an ongoing dispute - allowing you to spend it or transfer it to your bank.
PayPal is rolling out Funds Now to select businesses across the US, UK, and Australia (edit: also EU too now). To be considered eligible for Funds Now, businesses need to have more than six months of PayPal business account sales, a "strong selling record" with a "low incidence of claims or disputes," confirmed account information, and a "legal and ethical business model""
 
Thank you so much for your detailed answer here! I'm having some hard time understanding some of the things with collateral reserve itself (brain-fog is on... lol)

Basically, I can mention that in my case, my collateral reserve is $5000 (PayPal decided on that). So, as I understand, I will be able to cash out this money ONCE my active balance will reach $5000 in 45 days period, am I right?

I'm selling health related product, and I'm making around $30k/month, which is around 60% via Paypal payment gateway (another 40% to Stripe). So it brings me to ~ $17k/month to Paypal. And selling ONLY to United States, and my profit margins (COGS + Ad Spend) are ~33%.

My main problem right now is the uncertainty on when and how I can get this mentioned $5k reserve. For now, I'm not even quite sure if I'm up to use Paypal anymore but rather I'd like to do whatever it takes to get this reserve and pay for my employees, etc.
The collateral reserve is the minimum reserve required, you will never have less then 5k in the paypal account. If you want to cash out your account completely, you will leave 5k in the account (until the 120 days expires and the reserve releases)

You can only cash out anything above 5k. In practice your reserve will be higher bc the rolling reserve of 20% per sale is always renewing and releasing on 45 day intervals. In practise your reserve will flucuate from 6k maybe 8k depending on the time of month.
So youre profit about 13k/month, and leaving 6k in the bank on reserve. Really after the 1st month youre profiting and receiving the full 13k as the reserve is already met from the previous month.
Do you need that 5k? Or just worried you will never receive it?
Many businesses have a reserve. Its a condition of having an account.
You will not get that reserve back while you are actively selling, you will get it back after you stop. (unless one day they magically take the requirment away lol). They may reduce the reserve required in time.

Why not get a merchant account and likely see a 5% reserve? Whats your chargeback rate? What country are you a resident of?
 
The collateral reserve is the minimum reserve required, you will never have less then 5k in the paypal account. If you want to cash out your account completely, you will leave 5k in the account (until the 120 days expires and the reserve releases)

You can only cash out anything above 5k. In practice your reserve will be higher bc the rolling reserve of 20% per sale is always renewing and releasing on 45 day intervals. In practise your reserve will flucuate from 6k maybe 8k depending on the time of month.
So youre profit about 13k/month, and leaving 6k in the bank on reserve. Really after the 1st month youre profiting and receiving the full 13k as the reserve is already met from the previous month.
Do you need that 5k? Or just worried you will never receive it?
Many businesses have a reserve. Its a condition of having an account.
You will not get that reserve back while you are actively selling, you will get it back after you stop. (unless one day they magically take the requirment away lol). They may reduce the reserve required in time.

Why not get a merchant account and likely see a 5% reserve? Whats your chargeback rate? What country are you a resident of?


ooohh. Thank you very much once again!!

My main doubt right now is that I will ever receive $5k, and, of course, I actually need $5k (but nothing really can be done here), or the hell knows when I will receive it (but after your explanation - it's more clear now).

You've mentioned You will not get that reserve back while you are actively selling, you will get it back after you stop -> Do I need to just not receive anything from now on, or cancel PayPal account altogether?

For now, I'm thinking about whether to use PayPal or not since in my country (Lithuania) I can use Stripe now and I'm using with Shopify, but not quite sure yet since PayPal is giving me more sales (people trust PayPal more).

My chargeback rate tends to be higher than 1% but I'd take a look at hiring more VA's for customer support, etc. to reduce it

Also, what is merchant account? Where can I learn more about this?
 
Normally, funds are put to hold for a 6 month period or more.
 
ooohh. Thank you very much once again!!

My main doubt right now is that I will ever receive $5k, and, of course, I actually need $5k (but nothing really can be done here), or the hell knows when I will receive it (but after your explanation - it's more clear now).

You've mentioned You will not get that reserve back while you are actively selling, you will get it back after you stop -> Do I need to just not receive anything from now on, or cancel PayPal account altogether?

For now, I'm thinking about whether to use PayPal or not since in my country (Lithuania) I can use Stripe now and I'm using with Shopify, but not quite sure yet since PayPal is giving me more sales (people trust PayPal more).

My chargeback rate tends to be higher than 1% but I'd take a look at hiring more VA's for customer support, etc. to reduce it

Also, what is merchant account? Where can I learn more about this?
A merchant account is a direct credit card processing line with a bank.
Things like Stripe, Square, 2checkout, etc are know as PayFacs, what hey do is allow you to set up payments without the hassle of setting up a real account. So Stripe has its own Merchant account, and they kind of rent it out to you. Make sense?

Now, you only have 5k on hold, so why bother? Sure you can cancel the account and get the 5k after 120 days, but then you lose the service they provide you, its a cost of business.
Perhaps try only using Stripe for a month and see what happens to your sales. They may decrease and then youll likely see that 5k reserve was worth the extra profit.
Or not, who knows, but 5k locked up imo is nothing is youre profit 13k/month and have no cash flow issues.
 
A merchant account is a direct credit card processing line with a bank.
Things like Stripe, Square, 2checkout, etc are know as PayFacs, what hey do is allow you to set up payments without the hassle of setting up a real account. So Stripe has its own Merchant account, and they kind of rent it out to you. Make sense?

Now, you only have 5k on hold, so why bother? Sure you can cancel the account and get the 5k after 120 days, but then you lose the service they provide you, its a cost of business.
Perhaps try only using Stripe for a month and see what happens to your sales. They may decrease and then youll likely see that 5k reserve was worth the extra profit.
Or not, who knows, but 5k locked up imo is nothing is youre profit 13k/month and have no cash flow issues.

Thank you soooo much for your answers here! I was really looking for advises and info, what it actually means since no one, absolutely no one was able to answer me (neither with PayPal customer support, or their forum, etc.).

I've re-added Paypal to my shop now since I kind of see the decrease of sales (not that big, but the gap itself between "Reached Checkout" and "Sessions Converted" is bigger than when I have had PayPal).

For now - no cashflows issues since I have some funds from my previous businesses, as well as the fact that my profit margins are kind of ok since it's a dropshipping...

Once again - massive thanks, James!!
 
Thank you soooo much for your answers here! I was really looking for advises and info, what it actually means since no one, absolutely no one was able to answer me (neither with PayPal customer support, or their forum, etc.).

I've re-added Paypal to my shop now since I kind of see the decrease of sales (not that big, but the gap itself between "Reached Checkout" and "Sessions Converted" is bigger than when I have had PayPal).

For now - no cashflows issues since I have some funds from my previous businesses, as well as the fact that my profit margins are kind of ok since it's a dropshipping...

Once again - massive thanks, James!!
No problem man keep banking as much of that 13k/month as you can, live like a poor broke ass beggar and save save save and you never have to worry about cash issues when you have 100k in the bank. Then find something else to invest in after youve mastered your store so you can devote time elsewhere.
No doubt sales would continue to decline a bit (imo), hit me up on skype anytime for questions or anything to talk shop.
 
Back
Top