Chances are you are struggling to be accepted by merchant service providers. The thing to bear in mind that this is a very common scenario for owners of entirely legal, respectable businesses.
Rejection by one or more big names in the merchant services industry may have stunned you but there are probably several logical reasons, which have nothing to do with you personally.
In this short guide, we will provide you with some expert advice and pointers. These will help you find a good payment processor for your business and avoid being overcharged.
7 tips for getting a high risk merchant account
We explore each one of these later in this guide but here is a handy list for reference:
- Understand why your business is classified as high risk
- Know what banks fear most when handling card payments processing
- The role of underwriters in assessing your application
- What you will need to submit a successful application
- Things to watch out for when considering a provider
- Before signing an agreement . .
- The single best thing you can do to achieve a successful application
1. Understand what “high risk” means in the card payments processing industry
Banks and card processing companies are probably the most risk-averse of all enterprises. Their business models are set up to handle everyday businesses that they consider low risk.
Risk, in their terms, means the risk that they might incur a loss if they were to accept your business as a client. A growing list of industries are considered high risk for a number of reasons including:
- New industries, such as CBD oil and cannabis, and E-cigarettes or vaping
- Businesses with high ticket values, such as auto sales and furniture
- Ticketing businesses, such as events
- Travel and tourism including airlines and lodging
- E-commerce because of the risks when the cardholder is not present
2. The risks that banks fear the most from processing credit card payments
Without a doubt, fraud comes at the top of the list, closely followed by chargebacks.
Banks want reassurance that they will not be lumbered with the cost of fraudulent refunds or of excessive chargebacks. These can happen if the merchant goes out of business or for any other reason that means the bank will not be reimbursed.
The Government’s Federal Deposit Insurance Corporation has published an excellent summary of Risks Associated with Merchant Processing, which include Credit Risk, Transaction Risk, Liquidity Risk, Compliance Risk, Strategic Risk and Reputation Risk.
3. Know what underwriters look at when assessing your application
Banks and card payment processing companies employ underwriters to examine each application. Their task is to assess the level of risk they might be exposed to if they accept the business as a client.
While the main focus is on the operation of the business, its industry, credit history, and profitability, they may also look at the credit record of the applicant, especially for start-ups.
Important aspects are:
- Acceptable debt level
- Solid card processing history
- Negligible fraud by customers
- Low chargeback ratio
- Fees and charges paid on time with no arrears outstanding
4. Getting the paperwork ready – what you will need
The documentation underwriters may request can differ but these are the most commonly required items:
- Government issued ID of the applicant, such as a driving license
- A voided check to prove you own that bank account, or a letter from your bank
- Your business Federal Employer Identification Number (EIN shown on IRS form SS-4)
- Business bank statements for the previous 3 or 6 months
- Recent processing statements from your current card processor (if you currently have one)
- Financial statement for your business – latest tax return or P&L and Balance Sheet
5. What you want to avoid when signing up with a provider
Business owners who are over anxious and all too eager to find a high risk merchant account can sometimes fall prey to unscrupulous operators.
They may demand excessive fees and charges, could try to lock the business owner into a long term contract, or could include very unfavorable terms and conditions such as:
- High early termination fees (ETF) that are buried deep in the small print
- Hidden charges that you never know about until your statement arrives
- Receiving used or refurbished card processing terminals instead of new ones
These providers know that not everybody has the time or know-how to properly examine the details of fees and charges, or the fine print. Avoid being a victim, and ask plenty of questions.
Click here to read our guide on the Top 10 things to look for when choosing a high risk merchant processor.
6. Before signing an agreement, check the small print
The previous section listed some of the most common pitfalls that unscrupulous providers can include in their standard contracts. It’s always a good idea to have any legally binding agreement checked over by an attorney who is familiar with business law.
7. The best thing to do is speak with experts who know the steps
We at SecureGlobalPay have invested a great deal of time and resources in building a network of trusted and dependable specialist banks and card processing companies.
Each one works closely with a limited number of high risk industries. That means they fully understand the unique challenges that each business faces. In turn, they tailor their services to match the operation of those businesses. It’s a win-win scenario for you and for the service.
Start today. Click here to complete our online application form. We will provide you with a status in 4-5 days. If you prefer, call us on 1-800-419-1772 to speak with one of our payment experts for more information or advice.