[droopyEyelids]

It's not hard to understand.

Payment companies aren't going to give you other people's money as a free loan for selling future goods or services. From ticket sales of your first big event to crowd funding.

It violates every company's risk model. They have to hand you a huge chunk of money, allow you to cash out, and then wait for the chargebacks to come in months later. This kind of problem is spelled out in the tos.

What is the solution? Work with a company that will actually look into your financials and underwrite you. Braintree will do this. Your bank will do this. Authorize or whatever ancient CC processor will. Well, either they'll do it or tell you to move on before you've started processing with them. I think Stripe might have the same sort of instant approval, delayed rejection problem possible as paypal does here.

Don't try and use PayPal to avoid the underwriting process or prepare to have your heart broken.

[kijin]

The underwriting process is designed for stable businesses with a proven track record. It's not very suitable for today's crowdfunded projects, which is why those projects have to resort to PayPal. Just telling them to go through the good ol' underwriting process doesn't really help.

[droopyEyelids]

Doesn't help who? I say it does help them, because they need to understand no one is going to give them an unsecured loan, no matter what kind of business they're running. Thats the job of venture capital- not the job of your CC processor.

A crowd funding business especially needs to go through underwriting, which will involve proving they have the capital reserves or credit to handle problems that arise. Fostering the expectation that they should try to sneak a loan out of PayPal, or whatever payment company, is unhelpful.

Now, there is fault here in that PayPal's process isn't tight enough to catch them before they start processing. But you will find that fault to some degree with every modern payment provider.

[glogla]

It's disingenuous to refer to crowdfunding as to "unsecured load".

[droopyEyelids]

With a normal transaction, goods or services are provided in exchange for money.

With a crowd funded transaction, a promise of future goods or services are provided in exchange for money. Thats why it's treated differently in the payments industry.

Another way to think of it: If crowdfunding wasn't available to the business, a loan would serve the exact same purpose, wouldn't it? And if the business got loans from multiple providers, wouldn't that be a form of crowd funding? The only difference is that traditional loan providers have to work out their own security with the business, while crowdfunders get security from the chargeback mechanisms of their payment processor.

Do you see any of what I wrote as disingenuous?