PayPal froze over $15,000 of our business funds. Has anyone dealt with this?

★★★ signal-strong r/smallbusiness · ↑ 88 · 💬 107 · 2025-05-19 · kw: review response template · open on reddit ↗

Tool

PayPal

Issue

PayPal froze $15,000 of business funds without warning for 180-day risk review, blocking a small business ($20-25k/month revenue) from accessing capital needed to pay bills next month.

Cost

$15,000 frozen; risk of unpaid bills next month (quantified impact)

Recommendation

Switch to alternative payment processor; move funds to bank account immediately after receipt; hire lawyer to threaten civil suit for conversion (disputed—some say submit documentation and wait)

extracted with

anthropic/claude-haiku-4.5 · 2026-05-08

Body

We run a small business doing around $20–25k a month as a mix of local/online business, with the vast majority of our customers paying us via Paypal invoice. Out of nowhere, PayPal froze a little over $15,000 of our money and flagged it for a "risk review." No warnings, no chargebacks, just an email saying the funds would be held for up to 180 days. Thus far, we’ve sent them some invoices, proof of delivery, and client emails, which is what they've asked, but so far we have no response on a decision or how long it will have to wait. If we can't get access to the funds, there's a chance that we won't be able to pay some bills for next month. Has anyone dealt with this and have a solution for expedited release?

Top comments (8)

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[score=143] MagicOverlord

1) Set up a secondary payment portal. 2) Stop accepting PayPal immediately. 3) Hire a lawyer to write them a threatening letter, letting them know they have 3 business days to release your funds or face an immediate civil charge for conversion with attorney's fees and punitive damages for their untimely handling of their self-initiated random review, not related to any notice of dispute or any allegation of wrongdoing. A finance attorney can use some various banking regulations to help with the letter as well. Huge violation of finance regulations in the US. 4) If they don't release YOUR money, sue the fuck out of them.

[score=29] Citrous_Oyster

I never leave my money in my payment processor. I move it straight to my bank account as soon as possible. And I pay all my expenses with my business credit card and get points. Why are you leaving that much in PayPal? PayPal is notorious for this. If you’re willing to go as far, you can threaten a lawsuit and hopefully get a response.

[score=16] emryb_99

Yes this happened to me, which is why I will never use PayPal again for business purposes.

[score=12] wamih

Paypal should never have large dollar amounts sitting... there are tons and tons and tons of horror stories.

[score=12] inversemeplease

Just want to say I’ve been reading about these stories for the last 20 years. It’s insane that this still happens and that people still use PayPal. They can be replaced so easily and can’t wait for the day it happens on a broad scale.

[score=12] wafflecannondav1d

This is normal for PayPal. Submit everything they're asking for and it'll be unlocked. We deal with this every time we create a new account.

[score=10] RedNewPlan

This is a standard thing Paypal does. They did it to my friend's company on their biggest sales day of the year (New Years Eve), and then held it for six months, for no particular reason. They did it to my business also. Now, you can pressure them and beg, but they are not too responsive. For the future, take your money out as soon as you can, and try and do as little business on Paypal as you can. We stopped accepting it entirely.