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Etsy Holds Seller Funds in Reserve, then Introduces Cash Advance Lending Service


Etsy has been coming under fire for its practice of holding sellers’ funds in reserve – the story blew up in the UK when the BBC wrote about the hardship sellers are facing as the result of the financial squeeze.

But as sellers were sharing the BBC article (and forwarding it to EcommerceBytes) on Monday, Etsy sent an email inviting sellers to apply for a cash advance to fund their businesses through a program called YouLend, according to Etsy expert Cindy Baldassi and sellers posting in the Etsy discussion boards about the lending service.

Baldassi said some sellers found it ironic that Etsy was offering cash advances when it was holding some sellers’ money in payment reserves, “forcing some of those sellers to take out loans or run up their credit cards to pay basic bills,” she wrote on a post on LinkedIn.

The BBC interviewed an Etsy seller who said she could not see any reason why Etsy was suddenly withholding her funds after being active on the marketplace for the past 4 years. The seller said she woke up to a notification informing her that her account had been put on a 90-day period of reserve, holding 75% of her sales. “The 62-year-old said she would have made £5,000 this month and cannot take out a loan while she waits for the money,” the BBC reported.

The increase in accounts impacted by reserves appeared to have spiked beginning in April, and Etsy addressed it in an announcement post in May, where it explained: “When a reserve is active on a seller’s payment account, a percentage of a seller’s earnings on each physical order they receive will not become available for deposit for a period of time. This helps to confirm that the seller is able to keep up with customer demand by shipping on time and providing reliable and trusted customer service. Funds in reserve are released for deposit once the order is shipped and in transit (confirmed through tracking events from your postal carrier). In fact, on average in 2022, funds from most orders became available to sellers within 2 weeks of the order date.”

In that May post, it also advised sellers of risk factors that could lead to temporary payment account reserves, including a sudden sharp increase in orders; orders consistently missing tracking information or tracking events; orders not shipped on time; a recent increase in refunds; and new shops.

EcommerceBytes has been reporting on the spike in Etsy reserves and the resulting cash flow crunch sellers experience as a result since the spring, including this June 14th post.

A seller who received an email from Etsy on Monday announcing the availability of YouLend loans wrote in part, “How ironic that they are now offering us 3rd party loans through the platform! As they hold millions in reserves. Just popup in my email from Etsy.” She said a disclaimer in the email stated, “YouLend is not affiliated with Etsy, but is a merchant cash advance provider with whom we entered into a relationship.”

Another astute seller noticed YouLend uses a company called Plaid to facilitate its vetting process for its merchant loans. For those who aren’t aware, Etsy semi-required sellers to verify their accounts last year using Plaid, which was extremely controversial due to security and privacy concerns.

Sellers said at the time they were concerned about providing Plaid with the password to their bank account.

Ina Steiner

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She’s a widely cited authority on marketplace selling and is author of “Turn eBay Data Into Dollars” (McGraw-Hill 2006). Her blog was featured in the book, “Blogging Heroes” (Wiley 2008). She is a member of the Online News Association (Sep 2005 – present) and Investigative Reporters and Editors (Mar 2006 – present). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com. See disclosure at EcommerceBytes.com/disclosure/.

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