General Construction, Home Improvements and Landscaping businesses are three industries that are often recognized as being in the higher risk and harder to approve business categories. It is simply in the nature of these businesses to often accept very large dollar amounts on credit cards, debit cards and eChecks. Often times these transactions can be disputed, especially by unscrupulous customers wanting to back out of the large payment charged on a high interest rate credit card. Due to these high dollar amount ticket sales, sponsoring banks and credit card service providers often label these Higher Risk Construction business types as High Risk. Learn what is takes to get approved and stay approved for a Construction Business Merchant Account!
Acquiring banks and payment processors tend to employ experienced underwriters to examine applications for high risk merchant accounts of all business types. They pay special attention to those that operate in the construction industry, especially those that accept very high ticket sales. Not all banks and card processing services will process for this industry. If they are not all that familiar with the business model or have an appetite for risk, they simply will pass.
Why are Construction Businesses considered High Risk by Merchant Account Providers?
Credit Card payment processing companies and acquiring banks look at an industry from a very different perspective than just safety. High Risk Construction Merchant Accounts need specific acquirer’s familiar with the business model, who understand the specific needs of these types of businesses.
Banks as well as processors, tend to look at the potential profitability of handling a company’s card payments and also assess potential risks that could give rise to losses. There are about 60 industries in America that are considered high risk for merchant accounts. High Risk Construction Merchants are just one of them.
Top 3 Risks that Card Payment Processing Services see in the Construction Business
Fraud and chargebacks are top of the list of risks for many consumer industries. That’s because they often generate an operational loss which soaks up time and effort by their support staff.
The card payment risk profile for the construction industry includes these three major factors:
- Irregular Big Ticket Transactions
Large invoice amounts raise red flags because of the potential for chargebacks. The worst possible scenario for a card processing service is when a customer claims a chargeback and the construction company has gone out of business or is unable to refund the amount for whatever reason. That leaves the payment service provider holding the bag and the (probably very significant) loss.
Unlike consumer retail businesses with many face to face transactions every day, the nature of a construction or renovation project displays a very different payments profile.
Regardless of whether the business is large or small, agreed payments from clients are irregular. For small businesses, it is probably a good idea to inform the card processing service ahead of time and let them know of expected dates and amounts processed to help ease the acceptance and authorization process from their end.
- Licensing and Regulation
Because so much of public safety depends on sound construction principles being applied, the construction industry is heavily regulated.
It becomes even more complex when you consider that there is no central Federal licensing system. Roughly 75 percent of states license contractors, usually focusing on the business itself but some states also license the workers themselves.
Breaching regulations can be considered a criminal offence, with possible prison sentences.
What all of this means is a high perceived risk that a construction contractor might fall foul of legal requirements and regulations. That could result in litigation, which could include the card payment processing company or bank.
- Multi-Channel Payment
Contractors need to be able to accept payments in a manner that suits their clients. The last thing they need is any holdup in receiving funds. That usually means multiple card processing solutions and multiple merchant accounts.
Payments Over the Phone – This is classified as Card (or cardholder) Not Present (CNP). The risk inherent in this process is that the merchant is not face to face with the customer, cannot see the credit card or otherwise verify that the person making the payment is the authorized cardholder. This opens up the risk of credit card fraud and chargeback potentials.
Payments in the Field – Typically a small contractor may need to be able to accept payments on the client site. That could be in a home, out on a construction site or anywhere out in the field. It requires internet connectivity to the card processing service’s system via a special terminal or perhaps a virtual terminal through a tablet or smartphone which has access to a data connection.
Payments in the Store or Office – This is the regular model for walk-in customer payments using a standard card swipe terminal or similar device.
How to get a Construction Merchant Account for your Business
If you have found it difficult to find a bank that will give your construction business a merchant account, you are not alone. Acquiring banks and card processing companies favor what they consider low risk businesses in their terms.
The good news is that there are savvy credit card payment processors and banks who have taken the time to understand the construction industry, how it operates, and the unique payment challenges it presents. They have years of experience and have developed business models to suit.
Key to success in being approved for a merchant account is to deal with people who know who these specialists are. We at SecureGlobalPay have spent years building relationships with banks and card payment specialists in the construction sector.
What this means is that we are very good at matching applicants with suitable card payment solution providers who actively support construction industry businesses.
Take the First Step Now!
Know that you understand why construction businesses are considered high risk merchants the next step is to get a merchant account for your business.
Whether you are setting up a new construction business or switching from an existing card payment service provider to possibly save some money or get a better overall solution, now is the time to set things in motion.
Click here for our online application form. We expect to update you with a status report with 4-5 days. If you prefer, call 1-800-419-1772 and speak with one of our construction payment processing experts who will be more than happy to answer your questions.