| jeffweico | 01-09-2015 05:53 PM |
Re: how much can a PayPal account handle?
I can say from my experience with PayPal and other merchant account providers (real ones) that whenever you reach $5,000 per month in sales, that is when they start a process called "underwriting" which is a form of risk management.
Underwriting may include credit and identity checks, business verification, etc. How the industry came to that figure, I don't know. But if you don't believe me, just call a merchant account provider and tell them you are looking for a provider and want to know how long the approval process takes and that you expect $7,000 per month in sales. They will most likely tell you it will be a few days. Ask them why it takes so long and they will likely tell you that since you have such a high volume in monthly sales, your account has to go through the underwriting process first.
Real world merchants don't have this problem. They figure there is a limited amount of fraud that can be committed since customers leave with their items at the time of the charge. But they also have to go through underwriting, it is just not as stringent as for online merchants.
Now, when it comes to PayPal, if they feel your items are a risk, this process could happen a lot earlier. I would be VERY NERVOUS about going over $2,000 per month on an account selling DVD's, or anything else high risk.
Of course, the longer your track record with them is, the less stringent their underwriting department will be with you. Underwriting departments like to see steady business sales that increase over time, they want the owner to have assets and good credit, a history of very few chargebacks, no complaints of fraud or counterfeit merchandise, etc.
Keep in mind I am speaking GENRALLY here and not specifically to anyone's particular situation. It is just like with suppliers. If you own a restaurant that is new, suppliers will probably want cash on delivery. If you have been doing business with them for awhile and they can see you are successful, they will give you a line of credit.
With online businesses, they are very easy and cheap to set up. So they tend to be riskier for merchant account providers. Even with the best of intentions, things can go south quickly. Not everyone understands businesses and how they work. The value of inventory can decline over time (just think of electronics as a good example), you have to pay attention to things like profit margins, the time value of money, you have to understand how consumer sentiment can affect your businesses (and it is different for different businesses, depending on what they sell), and a lot of other factors. Unfortunately, a lot of people don't have any knowledge of these things. I can work out, on paper, how anyone can buy inventory and sell on eBay, becoming a millionaire in 6 months to a year. But that only works ON PAPER! Because in the real world, problems come up. On paper, everything is perfect. | 
