Preselling: what it is and how to mitigate risks.
Preselling is pretty common. Here are a couple of examples:
- When you sell tickets for an event like an upcoming concert or travel.
- When you need to use the money collected from buyer(s) to purchase the product from a distributor.
- When the product is made to order and/or being created, the item might be ordered and paid for upfront and then delivered after it’s completed. This is also known as delayed delivery.
If you’d like to presell items in an online store, keep in mind you’ll need to guarantee delivery within 20 days from the date of purchase and also let your customers know they’re buying a presale item.
Withdrawing payment from a presale.
We may ask you for documentation before you can withdraw payments from a presale. The documentation can include:
- Information about your supplier such as a contract and/or their contact information
- Proof of purchase from your supplier
- Shipping receipts
How PayPal helps protect against preselling risks.
PayPal also takes measures to protect you and the buyer in presales. One measure is an account reserve - an amount of money held in your PayPal account for a temporary period of time. It ensures your buyer receives the product or service they paid for within the agreed upon timeline. Learn more on account reserves here.
You can check if a reserve was placed on your account by viewing your on hold balance when you log in to your PayPal Business account and clicking on Money.
How to mitigate preselling risks.
Any time money is collected before an item is available, things can go wrong—some of which may be completely out of your control.
As an example, natural disasters can impact the production or delivery of goods. Or, your manufacturer may have internal issues that cause shipment delays. Unfortunately, you could also find yourself dealing with fraud on the part of your supplier or sudden inventory problems may cause a shortage of product.
In the case of ticket sales, events may be cancelled due to unexpected circumstances like serious illness or weather conditions.
Any of these circumstances can impact your ability to supply your buyer with the product or service they purchased. However, there are ways to mitigate your risk.
One way to lower risk for products and services with an extended delivery time is by dividing payments; a down payment to secure the order, and a final payment once you ship the product or deliver the service.
For example, if you’re selling a custom piece of furniture, you may initially charge the buyer for the materials needed. After you’re finished with the piece and it’s ready for shipping, you can charge the remaining balance.
Here’s how else you can help ensure a safe preselling transaction:
- Clearly state when an item will be available for shipping in your listing by specifying the correct handling time. The handling time specified in your listing needs to reflect the time from the end of the listing until the item is shipped to the buyer — not when the item is in your possession.
- Indicate it’s a presale item in the product listing.
- Make sure people can easily see the sales terms on your website with default font sizes.
- Clearly list the refund policy on your website. Being upfront will help your buyers accept the terms of an extended delivery, and it can also help you process any refunds smoother.
You can also access additional information by reviewing our FAQs at the bottom of this page.
Frequently asked questions.
You can learn more about how we grant funds to enrolled and unenrolled charities by reviewing our Donation Delivery Policy.
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There are 2 types of reserves we may place on your business PayPal account: rolling reserves and minimum reserves (one or combination of both at the same time).
- A Rolling reserve is a reserve where a percentage of each transaction you receive each day is held and then released later, on a scheduled basis. For example, your reserve could be set at 10% and held for a 90-day rolling period. It means 10% of the money you receive on day 1 is held and then released on day 91, 10% of the money you receive on day 2 is held until day 92, etc. Rolling reserves are the most common type of reserve.  >
- A Minimum reserve is a specific minimum amount of money that you’re required to keep available in the balance of your business PayPal account. We either take the minimum reserve as a percentage of money held until it reaches a certain amount, or a one-time amount (this is known as an Upfront reserve).
Why does PayPal use reserves?Reserves are used to prevent transaction losses that may occur from payment reversals like chargebacks and claims filed by your buyers. Ordinarily, if you have a reserve on your account and receive a chargeback or dispute, we will deduct that amount from your available balance and not from any reserve balance. However, if a seller goes out of business or stops processing payments through PayPal, we will use any reserve to satisfy future payment reversals.
Reasons for placing reservesReserves are a common industry practice. They are used to minimize losses and to create a safer shopping experience. If you would go out of business or would be otherwise incapable of covering your financial obligations, we would still need to pay back the buyer. If a buyer contacts PayPal or their financial institution because they didn’t receive what they ordered, we’re responsible for making things right. A reserve can be placed on your account for a number of reasons and is set on a case-by-case basis. PayPal considers a list of factors to determine this including:
- Your processing history with PayPal and other providers  >
- Whether your industry has a higher likelihood of chargebacks or refunds  >
- Whether your account has an elevated number of customer claims and disputes  >
- Your business and/or personal credit history  >
- Whether you are selling products or services in advance (preselling orders)  >
- Your delivery time frames - whether there are extended delivery timeframes
When will I get my money?Once a reserve is placed, you will receive communications outlining the terms of your reserve. Your terms are also outlined in your account. When your money is released depends on what type of reserve you have.
If you have a rolling reserve, the funds will be released after a certain period of time. For example, if you have a 180 day rolling reserve, funds from Day 1 sales will be available on Day 181.
For minimum reserve, reserves are reviewed every 180 days. PayPal proactively reviews reserves, and based on improvements to your business performance, it is possible that your reserves could be adjusted or removed.
How to prevent reserves from being placed on an accountReserves may be a necessity throughout your relationship with PayPal. Preventing reserves isn’t always possible, and depending on your industry and your credit history, you might never be able to fully remove a reserve from your account.
However, you can reduce the likelihood of having a reserve and improve your customer service in the process by following Seller Best Practices, which is a win-win for everyone.
Seller Best PracticesSome best practices to follow are:
- Ship promptly and give your customers valid tracking information through PayPal, so they can keep tabs on their purchases and know when to expect delivery  >
- Communicate early and often with your buyers and let them know about any changes, delays, or other important information  >
- Monitor your buyer complaint rates regularly and try to keep complaint rates below 1% of your sales.  >
- Avoid long refund times, which can lead to complaints from unsatisfied customers
You can also access additional information on account reserves by reviewing our Business Resource Center.
WithBusiness Insurance by Aon, PayPal’s small business merchants can get the coveragethey need quickly, simply, and online.
Here's how you can purchase Business Insurance by Aon:
- Go to the PayPal App Center.
- Click the Aon Business Insurance tile.
- Complete the Aon application.
- Review quotes online, or speak to one of Aon’s licensed insurance advisors to guide you.
- Purchase the insurance policy.
- Access your certificate of insurance.
Where canI get more information about the Business Insurance by Aon?
Youcan contact Aon online at https://www.aondigital.com/en-us/paypal/ or overthe phone at (267) 459-2643.
Ifyou have an active policy, you can access online chat within the Aon portal at https://www.aondigital.com/en-us/paypal/wallet.