Ebay via YOULEND - anyone got any pros and cons

[eddy130_1]

Hi All,

I hope sales are good!

Today we received a generous offer from eBay Capital that would be enough to rent a unit for a year. I believe that you pay a daily percentage of sales. The previous similar type of loans via P-pay were very straightforward and handy for a few thousand pounds now and then.

I’ve heard both good and bad things about You Lend. Does anyone have any stories or information before we consider contacting them?"

[pillarboxred]

You know what you are doing. I looked up Youlend on Companies House and it is a young company which the directors set up in London after closing a similar business in Denmark. Youlend is growing and is itself using borrowed money and only lost £2 million last financial year (LOL). They do seem to have a clear idea of what they are doing and are focused on the SME sector (that's us). Someone like yourself who has a crystal-clear view of your market can borrow safely but you might be the exception: most of us muddle along.

[therenewalworkshopltd]

To be fair, if your going to borrow money, you need to understand what you are doing and not just muddle along.

If you don't understand, then speak to someone who does.  But this doesn't just apply to borrowing money, but to everything you do in business.

If you don't have a clear idea of what you are doing when borrowing, you are very likely to get yourself into trouble.

[jace_mindu]

In a follow up to my previous post, where I spoke more about the advantagies of the YouLend option, after having trialed the service for a while, I can provide another view. This is not to disregard my previous comment as I stand by it, but it's to provide an alternative view, namely how the service could be a problem and even flawed for some sellers.

What I would point out is their policy is repaying the loan by 'sweeping' your sales at a fixed percentage. In my case, this was stated as 13%, but given they take this from the gross, this is closer to 16% from your payout.

Now if we refresh and say the loan in my case, started with a 11% premium, which I believe is quite good for this type of loan, I was predicted to pay this off over 4 months, and with my account over their projections, I'm more than on track to pay this off early, which might seem all well from their end. However, the key difference here is between 'organic' and 'capital injection' from loans.

A quick definition: The organic growth side would allow a seller to grow their business from within, reinvesting well-earned profits back in the business, focused on their best products, to grow at a reasonable rate and natural pace. A capital injection is used to either stimulate more immediate growth or offset potential financial distress.

YouLend is without doubt, a capital injection. I have spoken about how to utilise this but I would urge all to read my previous posts on this.

The cash from YouLend at first, seems ideal to buy more stock, negotiate discounts or evolve the business, where limited cash flow might be a problem. What I found was that although initially, this money allowed me to buy additional stock and equipment, over time, once I had reached a peak economy of scale, the aggressive growth from this cash had stalled, but where the business to return to organice growth, the problems became very much apparent. 

The flaw is this; by determing a fixed percentage that comes from every sale, what might start initially as a cash injection, can lead to them choking the life out of your business.

Consider this to a fixed loan from a bank for instance, where you might take a £4000 loan, paying £200 a month based on an affordable deduction from your sales. The £200 might seem a lot at first, but if that loan allows your business to double, those repayments and payment period remain the same, so you might now have an extra £200 left to put towards new stock and continue growing. As you continue to grow your profits, you can choose a time to pay more back on the loan, such as at the end of a tax year (subject to any early repayment fees), and consider a new loan based on your specific circumstances.

Where YouLend fails, is that if you borrow that same £4,000, that fixed percentage 'sweep' means the more you sell, the more they take. Where it might look great to be ahead on your repayments, the reality is that even if you spent that entire £4,000 on stock, a 16% deduction, on top of fees and costs, is for most sellers, the entire profit margin. Even if you only borrowed just £400, their sweep percentage still eliminates your profits the same way, even if for a shorter time period. You are effectively buying and seller with no profit margin until your have paid back the loan. This is where the system fails.

Rather then applying a fixed sweep from your profits, YouLend should be capping their take. They are already able to project your repayment period, so rather than taking this fixed percentage all the time and putting your ahead of their projections, they should either apply a cap that keeps you on track with your determined payment period, allowing you to utilise profits to continue growing, or they should be willing to renogotiate your loan terms based on performance. On track to pay back the loan in 2 months instead of 4? Why can't they halve their sweep and keep to the original 4 month plan?

The obvious issue is that most companies, even at the back end of a cash injection, cannot operate for long without regular profits. YouLend is obviously immediate and provides a eBay-compliant method of ensuring you pay it back, but their service in it's present formation, should be no more than a short-term boost. It seems the larger the loan, the risk to your business multiplies and a long period of unprofitability, could  easily destroy a business.

A 11% permium on a loan is a great rate, but a 16% sweep offsets this. Even a A 16-23%APR credit card might seem extreme, but the freedom to allow you to utilise your profits as you see fit, inbetween your 30 payment periods, gives you more breathing room to utilise your profits more effectively. Most will start you at around £1,000, but expand your credit to suit your repayment habits, which seems more in line with organic growth mentioned before.

I'm not recommending anything here, but I think I am in a unique position to offer a well-balance view based on my experience. I hope this helps out anyone considering YouLend to have a better view of the risks involved.

Reply directly if you have more questions.

[dch2112011]

Put quite simply youlend calculates on your projected turnover rather than actual profit  with a minimum repayment but no maximum.

The reason this works for youlend is if you are projected to repay in 4 months and repay in 2  you lend will offer a larger loan after 2 months based on your new projected turnover  and so the cycle begins.

What it does is makes your business dependant on ever increasing loans to keep afloat especially if the loan is not utilised for growth ie you pay a few bills and then do not sustain an increased turnover for long enough to repay the loan because the increased stock runs out and you start to struggle with the minimum repayment. 

Youlend will then either refuse you another loan or vastly reduce the amount leaving you potentially worse off than when you started.  Think of these loans as pay day loans based on your gross pay not what you take home !

[jace_mindu]

Yes it certainly does feel like a trap. Give you a huge sum to start off with, knowing that most won't anticipate the long term effects of not having profits to reinvest, inevitably ending up in financial distress and needing additional support to pull out, so this 'cycle' continues. Even a cash injection from a 3rd party won't solve the problem as any additional sales boost won't create any more profit. The only way to break the cycle is to pay off the loan, gain external funds to cover costs or start selling from an independent eBay account. Not an ideal situation.

I really think eBay need to stop promoting the service. They let YouLend do the sales pitch and effectively wiping their hands of the problems it can cause. I seriously doubt their customer service teams have any understanding of the risks involved, let alone want any involvement in promoting it.

[tabletop-hobbies]

I'd avoid unless you're desperate, but if you're desperate then maybe sacrificing 20% of your sales isn't a great idea.  Financing for rent is a bad debt- it might be more justifiable for stock that you know will shift quickly but anything else is a nono in my book.

There is cheaper finance out there, if you need to build up your business credit rating then get a business credit card and pay it off every month before working up to a loan.

I did use youlend a while back, the repayments are pretty crippling as it was basically eating my profit margin so I ended up getting a conventional business loan that had a more flexible arrangement (ie pay monthly). Youlend still got their fee of course as they add that on at the beginning.

They contacted me recently to offer me money and in the spirit of fun I did negotitate them down to a 10% of revenue repayment, which is more reasonable and i might take them up on it in future.

[chrismcc1953]

I would 100% recommend getting one if you need stock. It's free money in my eyes. I took one out for £3000 from that £3000 I made £12000ish. It's money I wouldn't have had as I didnt have the capital at the time to buy the stock. I paid 25% of my daily sales, sounds a lot but it was only money I'd made from getting the loan. I wouldn't hesitate to get another if I needed to. Its only when you use the loan for other things it could become a problem. The money is for your business not for a new haircut and set of nails.

[cookienabber]

How can it possibly be free money when right from the start, you have to pay a setup fee, followed by an interest rate? Also, a 25% cut is far more than  most companies can tolerate long-term, when most are lucky to be hitting a 10% profit margin. From the items you are selling under your profile, the key reason why this may not have impacted you as much is your low sale volume on 2nd hand goods, which I assume would be a high profit margin whenever they sell. Stores operating a higher sales turnover on 10% margin, need to recoup their profit to replenish stock levels, so YouLend taking their profit and another 15%, prevents them from doing so. The compound effect of this can shrink a business drastically.

[dch2112011]

You borrowed money from youlend to fund your private account ?  or do you have a business seller account as well ?

If  you are registered as a private seller you really shouldn't be buying stock to resell because it is against ebay policy !

[cookienabber]

I have a business seller account also. I wouldn't discuss financials on that for obvious reasons. I can tell you that I've been trading for 3 years, am a top-rated seller with 100% feedback and handle over 500 orders per month, growing. The reason for capital was to capitalise on a succesful business model by scaling up, using funds to secure better deals on products with wholesalers, securing further compound growth. This is a common goal for any business, hence why securing capital through correct means is vitally important.

YouLend is a cancel on eBay sellers as they fail to take into account eBay fees, which with selling fees, subscriptions and advertising etc, is 42% for my business, then shipping on top. If we were to say 50-60% is costs, 10% profit, the idea of YouLend taking 25% of revenue, leaving me with only 5-15% of the transaction, would be devestating to my business.

A lot has been said and I think it does depend on what people are selling, but where someone selling 2nd hand goods might have a better profit margin, those selling brand-new goods are unlikely to be making enough to survive a YouLend loan.

For those looking for practical advice, a new business can secure a government backed line within the first 3 years of registering, up to £25k and 6% apr. The people administering this have rather draconian application processes, still working with excel spreadhseets and such, so I was personally frustrated with the process and ended my application.

If you have been running things correctly, specifically, operating from a bank account specifically for business purposes and are registered (or prepared to) with company house, Cap on Tap are in my opinion, a fantastic option, as a business credit card. They use Fintech services to check your registration, and offer a small ammount immediately, but they offer plaid to link to your bank account and then offer a higher amount based on your cash flow. They check your ID on your phone and come with a great app.  They are currently offering 3.4% interest (0% if you pay off your balance) and 1% cash back. The process for me took about 10-15 minutes and I had access to funds within minutes, thanks to their digital card option. The entire process puts a lot of services, even that gov-backed scheme to shame.

I'm not saying go for this as it all depends your particular circumstances, but if you are serious about growing your business, YouLend is a dangeorus way to go, and there are better options out there if you are running your business the right way.

[chrismcc1953]

Whatever accounts I've got is nothing to do with you. I've had my accounts for years, do you not think if I was going against ebay policies they'd have let me know by now! I posted on this to discuss the benefits of a loan not my account, so politely keep your nose out.

[dch2112011]

It was just a question to do with youlend in that if they are lending money to non business accounts to buy stock and ebay are by default condoning it in the process to avoid  legal requirements to provide consumers with their rights it needs to be questioned -  that was why i queeried wether you were buying stock to sell on the account you were posting from or whether it was for a different business account 

If you want members to keep their noses out - don't post the information you do publicly !  

Your response sums it up !

[goingfishinguk]

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@chrismcc1953 wrote:

I would 100% recommend getting one if you need stock. It's free money in my eyes. I took one out for £3000 from that £3000 I made £12000ish. It's money I wouldn't have had as I didnt have the capital at the time to buy the stock. I paid 25% of my daily sales, sounds a lot but it was only money I'd made from getting the loan. I wouldn't hesitate to get another if I needed to. Its only when you use the loan for other things it could become a problem. The money is for your business not for a new haircut and set of nails.

---

Hi, I'm astonished by this reply if I'm honest.  I'm mostly out of the eBay game now.  To be honest Youlend was one of the reasons why.  I'm not an 'expert' so to speak but lets look at your claims.

You made £12,000 from a £3000 loan.  Okay...

Youlend take 25% of that £12,000 so there is £3000 gone

eBay take at least 20% of that as well.

eBay will take advertising fees.. please insert your % here, can be 5% but can be 17% or more.

VAT?  There goes another 20%

Cost of postage and packaging?

Cost of the stock you bought?

Other misc costs and fees.

What exactly are you left with?  From where I'm sitting I bet you have sold at a loss unless you have a huge 70-80% profit margin.  Like I said I'm not an expert and I'm sure others are here who will reply but dear me there is no way in the World running a business on Youlend terms is EVER going to make you money.

[cookienabber]

That is a good point. I was still a private seller when I had the YouLend invite. The whole point of raising capital was in preperation for my business registration and without a doubt, the loan I took seriously impacted my business. I've been working overtime to bring in more funds to help balance out hundreds going to YouLend each month. Compared to the amount borrowed, the repayments are extortinate, mafia-like, compared to let's say, a *bleep*py 21% APR from a credit card. I've discussed the issue with eBay and have been very clear, this service is disasterous for eBay sellers and eBay should be looking out for them. especially private sellers who are more likely to note have access to additional funds to cover the deficit.

[therenewalworkshopltd]

To be fair, the loan is not extortionate.

It's different to other loans in the way you repay it, which can make the payments higher, than would be expected on a regular loan.

It's actually no different to the Paypal Capital loan.

And as with any lending you need to understand what you are getting and what it's going to cost you.

As long you understand exactly what you are doing, then a loan in this way, can be good for you.

It does have the advantage of being easier to get, than your standard type loans.

Possibly the biggest disadvantage to this kind of repayment system, is that if your income goes up, your payments do as well.  However, as long as you have more than one income stream (ie you sell elsewhere and not just as single ebay account), then it's should be quite easy to cope with.

You can't really complain about the repayments, when you would have known exactly how they work when you signed up for it!

[chrismcc1953]

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@dch2112011 wrote:

It was just a question to do with youlend in that if they are lending money to non business accounts to buy stock and ebay are by default condoning it in the process to avoid  legal requirements to provide consumers with their rights it needs to be questioned -  that was why i queeried wether you were buying stock to sell on the account you were posting from or whether it was for a different business account 

If you want members to keep their noses out - don't post the information you do publicly !  

Your response sums it up !

---

Like i said this is a thread about the pros and cons of a loan not my account. What information have I posted other than information about a loan I got, whether I sell as a private or business seller wasn't mentioned by anyone but you.

[cookienabber]

The issue here really is that YouLend has been promoted by eBay with nothing more than a poster and link on their side. They have stayed away from giving any specific information. The YouLend staff claim to use information on our sales, provided by eBay, to determine affordability. This process shows two serious issues:

One issue is whether YouLend are truly determining a suitable capital loan amount and repayment structure that is suitable and beneficial to a business. From my experience, and clearly others, it seems they are taking advantage of healthy businesses by offering capital and a 'fair' repayment method, but in reality, they trap you in a loan that can seriously harm your business income. They make a premium on the initial loan setup charges, the interest, and a short loan period, meaning they can the suck the life out of your hard earned business very quickly, then promote additional funding. If you are eligible for a loan, why can't they, like any other loan, provide a fixed repayment period, that enables you to invest the capital use your compound growth to overtake your installment amount, see an improvement in your cash reserves and possibly pay back early?

Secondly, eBay should be aware that for any business, YouLend taking profits/capital at the rate they do, can danger the long-term survivability. As in my case and others, I acquired capital as I needed to scale up, and the result was the complete opposite and the compound effect of them taking profit and 15% more, would have destroyed my business if not for taking on some serious overtime and using up my own cash reserves to cover the deficit. If an eBay business goes under, eBay suffers too, so they should be looking into this and determining whether it is a safe product to be actively promoting to their customers. Their ignorance is no excuse to promoting a dangerous product to customers, private or business, and any comission they receive from YouLend is disgraceful if it harms a seller.

[therenewalworkshopltd]

I'm sorry, but that is a load of rubbish.

At the end of the day, Ebay is just placing an advert in front of you, just like many, many other companies do.

It's entirely up to you as to whether or not you pay attention to the terms and conditions of the offer your taking up.  Nobody is forcing you into it.

As to how they determine how much to lend people etc, there are MANY companies doing this the exact same way.  Amazon is the biggest one that I know of off hand.  There are in fact entire companies based around lending on turnover.

You lend will work under the finacial services and as such, they will be obliged to give full disclosure as to exactly what the loan is, how much you have to pay and the interest charges etc.  

So to say that you are being trapped into a loan, is plainly ridiculous.

Or did you not read and understand what you were actually doing, before signing on the dotted line?

You are of course aware, that this exact same method has been used for a long time via Ebay, only previously it was through Paypal loans instead?  There is literally no difference in the two methods.

At the end of the day, there is only one person responsible for taking out this kind of loan and that is the person who agrees to it with full knowledge and signs on the dotted line!

It's insane blaming Ebay, for a mistake you have made yourself.

Had you actually thought about it, you could have got a loan from the bank and paid that one off.  Or more sensibly, approached the bank in the first place.

[therenewalworkshopltd]

"If you are eligible for a loan, why can't they, like any other loan, provide a fixed repayment period, that enables you to invest the capital use your compound growth to overtake your installment amount, see an improvement in your cash reserves and possibly pay back early?"

Very simple answer to this, because that is not the way they work!

[cookienabber]

My point was rhetorical. My point was whether their agenda considers the benefit of their customers, or whether they are just trying to get a quick cash grab from business at their peak. If the business goes under as a result, why should they care, when they made a fortune from sucking the life out of your business like a vampire.

I've worked in boiler rooms before and trust me when I say, there are plenty of naive sales persons selling a bad product to customers for a nightly comission, and it is ALWAYS the customer who ends up worse off. There's a reason why it isn't hard to find quick cash companies who have eventually end up on the wrong side of the FCA for selling a product that leaves customers worse off. YouLend may be is exactly that type of product, but unfortunately, these types of companies always end up operating for too long, causing far too much damage, before they are stopped. Not to say this is an FCA issue, but would be nice of eBay took a closer look at the practices instead of their current hands-off approach.