Growing Pains: Our Experience with PayPal’s Restrictions During Rapid Growth

It’s been a whirlwind couple of weeks at KfzPortal24, and not in the best way. We’ve been growing quickly—so quickly, in fact, that PayPal took notice. And while that might sound like a good problem to have, it came with some serious challenges that hit our business hard.

When Growth Becomes a Problem

Like most startups, we’re always pushing for growth. But what I didn’t expect was that growing too fast would raise red flags with PayPal. A couple of weeks ago, we received a notice that they were temporarily restricting our payments because of an unusual amount of payments (basically the speed at which our business was scaling). According to Google, this is fairly common when payment processors flag rapid growth as a potential risk.

PayPal wanted us to prove we could fulfill all the orders on our platform. This kicked off a detailed audit that required us to:

Prove we have processed recent orders successfully.
Describe in detail what our business does and how we operate.
Provide documentation showing that we could handle the sales volume we saw.

While all of this was understandable from a risk management perspective, it came at a huge cost for us.

The Impact: Lost Conversions, Lost Money

The audit process took several days to complete, and our payment processing was restricted during that time. As a result, our conversion rates dropped significantly. This wasn’t just a minor hiccup—Google Ads down-ranked us because our conversions took such a hit. And as anyone who relies on paid search advertising knows, a drop in ranking can be devastating.

For about two weeks, we were losing money while we scrambled to fix the situation with PayPal and wait for Google Ads to become our best friend again. It was frustrating to see such a positive growth trend become a major setback because of something largely out of our control.

Getting Back on Track

Thankfully, we were able to work through the audit with PayPal, and I’m hoping that they’re now satisfied with our ability to fulfill orders and scale as we continue to grow. It was a challenging experience, but one that taught me some valuable lessons about managing rapid growth and the hurdles that come with it.

While I’m cautiously optimistic that PayPal is now robust and ready for our scale, this experience has reminded me of the importance of being prepared for these kinds of issues—especially when working with payment processors that have strict risk management protocols.

Lessons Learned

There are a few key takeaways from this experience that I think are worth sharing with any other startups facing or preparing for rapid growth:

Be Proactive with Payment Processors: If you’re scaling quickly, contact your payment processors before they flag your account. Let them know what’s happening and be prepared to provide the necessary documentation. It is good to make your payment provider aware, especially in a business like ours, where payments get refunded frequently.
Have Backup Plans in Place: We didn’t have a contingency plan for what to do if a major payment processor restricted us, and that hurt us. In hindsight, having multiple payment options or a clear backup plan could have mitigated the damage.
Expect the Unexpected: Even positive growth can create unforeseen challenges. Be ready to face issues that come from scaling fast, and don’t be caught off guard if something like this happens to you.

Moving Forward

We’re back on track now, and I hope the PayPal situation is behind us. It was a frustrating experience but one that made us stronger and more prepared for future growth. Here’s to hoping that PayPal is happy and that we can continue scaling smoothly!

Have you experienced something similar with your startup? I’d love to hear how you handled it.

Until next time,
Mats