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Startup Founder Claims PayPal Froze $20,000 in Funds, Then Offered Him a Business Loan

Startup Founder Claims PayPal Froze $20,000 in Funds, Then Offered Him a Business Loan
Image credit: Entrepreneur
Former Staff Writer
2 min read

The founder of Hacker Paradise, a startup that organizes trips for entrepreneurs who want to work while traveling the world, has a bone to pick with PayPal.

In a widely circulated Medium post, Casey Rosengren details how one month after Hacker Paradise opened a PayPal account, the company froze all of its assets, totaling $30,000.

Given that Hacker Paradise is a travel company and receives funds from all around the world, this wasn’t surprising, Rosengren writes, and after some back and forth, the company was able to get $10,000 released. In the meantime, Rosengren and his co-founders scraped together personal funds in order to keep the company’s cash flow positive.

But what came next astounded him. With $20,000 of the company’s earnings still frozen, ads on Hacker Paradise’s PayPal account started appearing offering the company a Working Capital loan -- a loan that the company says is reserved for “select businesses with a strong PayPal sales history.”

Related: Apple May Launch a Venmo Competitor

“On one hand, Paypal was saying that our account was too risky for them to release the $20,000 they’d taken as collateral,” Rosengren writes. “On the other hand, they were saying our account was credible enough to offer us a loan.”

When Rosengren voiced this discrepancy to PayPal, a representative responded that “your particular scenario has generated much conversation at many levels of our organization,” but ultimately affirmed that, though the offer may seem counterintuitive, “this was not an offer made in error.”

This left a sour taste in Rosengren’s mouth. “Paypal causes a cash-flow crisis and then offers to fix it,” he writes. While Hacker Paradise was ultimately able to weather the storm with its own funds, a more cash-strapped organization might be forced to take the loan or close up shop.

Hacker Paradise received its $20,000 back a day ago, which is what prompted Rosengren to write the Medium post. The company has since shifted to Stripe.

PayPal did not immediately respond to request for comment.

Related: PayPal Makes Its First Acquisition Post eBay Split

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