eBay, PayPal, Temu and B&Q are among the large businesses that are backing a new pledge that promotes fair treatment for small businesses with regards to cashflow and payments.
Providers must carry out checks to ensure they are complying with a wide range of regulations, which can lead to funds being withheld from small businesses that sell products using online marketplaces or take payments using payment platforms.
However, many founders have complained that why their money has been blocked is often not properly explained and they have to wait many weeks to receive it which has a negative impact on cashflow. Some have said they have been left waiting for tens of thousands of pounds which has pushed them close to bankruptcy.
For the new 10-point pledge set up by the Office of the Small Business Commissioner (OSBC), providers commit to communicating effectively with small businesses when funds are withheld, support them understanding their obligations and to deal with complaints or other issues as quickly as possible.
OSBC has also published a guide which explains the terms and regulations under which businesses may have their funds withheld. It also advises founders how they can effectively navigate the issue to avoid situations where their money is blocked.
Writing in the guide is Karen Riddick, founder of Second Nature Online, who uses several online marketplaces including Amazon, Etsy, Ebay, Faire, Wayfair, B&Q and Ankorstore.
She said: “One marketplace stopped paying out whilst waiting for an updated product liability insurance policy (that I had already submitted) and this took a short while to resolve.
“Marketplaces will also put funds on hold if a case is opened by a customer. This is understandable but irritating when the customer is falsely claiming something.
“Marketplaces will also refund customers for reasons which do not stand up. Whilst this may be low level in the grand scheme of things it counts as lost payment rather than delayed payment.
“These days most things are managed by opening cases and marketplaces can be slow with case handling. I have resolved most of my withheld payments but it can take a disproportionate amount of time especially when there is rarely a human being to speak to.
“The regular disbursement schedules used by marketplaces become a steady aspect of monthly cashflow for small businesses – hence when this schedule is disrupted for reasons that are slow or difficult to resolve, it can present a major headache – often triggering the need for emergency short term borrowing.”
Small Business Commissioner Emma Jones, who has a monthly column on SMEWeb, said:
“I’m delighted to see so many major businesses show real leadership and commit to treating small businesses fairly. Online marketplaces and payment providers can help boost small business productivity, but they are also under a wide range of legal obligations which can often impact small businesses access to their funds.
“This guidance, along with the pledge made by these companies, will help to ensure small business know their rights, have the support they need, understand what factors influence the withholding of funds and help them make the most of the opportunity going digital brings.
“This is also just the start. We are working with more companies that we hope will be able to sign in due course so that we can promote this guidance and reach the widest audience of SMEs.”
The full list of companies signing the pledge so far is Sumup, eBay, Tesco, Onbuy, PayPal, Fruugo, B&Q, Stripe and Temu.
Eve Williams, VP and general manager at eBay UK, said:
“We want to make sure that our sellers get paid as quickly as possible, especially the hundreds of thousands of small businesses who use our platform every day. We know how vital cash flow is to allowing small businesses to invest and grow.
“Sometimes we have to hold payments either because of regulations or as part of our efforts to ensure a safe marketplace for our buyers. However, this should be the exception rather than the rule. We therefore welcome this initiative by the Small Business Commissioner to help businesses get the support they need to grow.”
Georgina Robertson, head of SMB UK at PayPal, said:
“Small businesses are the driving force behind local economies, and they remain at the heart of everything we do at PayPal. We engage with them daily and understand the unique challenges they face, from managing cash flow and building customer trust to scaling operations in an increasingly digital marketplace.
“We are proud to sign this pledge as part of our ongoing commitment to provide small businesses with financing and safe, secure, and easy to use digital payment solutions that not only help them get paid swiftly but also protect them and their customers at every stage of their journey.”
Small business pledge
Under the terms of the pledge, signatories agree to the following:
- If accounts are reserved or funds withheld, inform the small business promptly with transparent communication including as far as practical (subject to legal restrictions) information on the reasons for holding funds and timelines for the hold.
- Provide as clear details as possible as to what steps need to be taken to release funds that are withheld, if permissible under applicable laws.
- Aim to implement effective and efficient processes to undertake relevant checks, aimed to limit any disruption to cashflow as far as possible.
- Provide clear terms and conditions around withholding funds and clearly communicate any material changes to sellers.
- Where investigation shows no legitimate reason for holding funds remain, or where sellers have met all obligations asked of them, ensure funds are released as quickly as practical.
- Ensure that any decision to impose penalties or require refunds from small businesses is evidence based.
- Where funds are withheld from a small business, have a process in place to undertake a timely individual case review in response to customer complaints.
- Enable small businesses to appeal decisions, allowing them to provide further evidence to support their case.
- Not deliberately target sellers with working capital solutions, outside of general advertising, when funds are being withheld in an attempt to profit.
- Work constructively with government and the Small Business Commissioner in promoting this good practice to small businesses.
The pledge and new guidance is being launched at the ‘Free the Founder’ event in London today with speakers from government and large companies with small business customers. You can watch it online here.