Over 40 million firearms were purchased legally in the United States in 2020. In the first month of 2021, 4.1 million guns were bought by civilians. It was the biggest month for gun sales in the history of America. With the opportunities currently available for online gun sales, learn what it takes to properly open an online firearms payments merchant account.
Online gun sales are a profitable business, but traditional financial organizations have refused to be part of the thriving industry.
The gun dealer industry has a controversial background in legal issues, fraud, and excessive chargeback ratios, which keeps most acquiring banks from partnering with firearm sellers who are seen as high-risk merchants.
Every online business must have the capacity to accept and process card payments in order to survive, including firearm merchants.
And since many banks have chosen not to partner with gun-friendly credit card processors for online gun sales retailers, you need to find the proper financial solutions providers who can.
What You Need for a Firearms Merchant Account
Most online applications for firearms businesses usually ask for at least 5 of the following documents:
- A valid government-issued ID such as a passport or driver’s license
- Business plan
- Bank statements for the last 3 months
- Federal firearms license
- Social Security Number (SSN) or Employer Identification Number (EIN)
- Utility bill
- Credit or debit card processing history for the previous 3-6 months
- Chargeback ratios are less than 2%
- Copies of agreements from suppliers
- Screenshot of the home page of your firearms website
You also need articles of incorporation when applying for a gun sales merchant account. If you do not have these documents, ask for them from the Secretary of State’s office where the business will be located.
Don’t forget to prepare financial statements with your application. This will largely determine how much processing volume you get to control every month.
All in all, your documentation should include your most recently filed tax returns as well as balance sheets with your profit and loss statements.
A voided check is also relevant to your application. Get a voided check for the bank account you wish to use with your firearms merchant account.
In contrast, you can get a statement from your bank. Make sure the statement contains the following
- Business name
- Account number
- Routing number
The letter must be signed by the manager of the bank.
There is no guarantee that your firearms merchant account application for online gun sales will be approved. However, applicants usually get feedback within 48-72 hours.
Why You Cannot Get Instant Approval
Some gun-friendly merchant account providers claim to offer instant approval to firearms dealers. This is simply not true.
This is a marketing gimmick. It is just not possible for your gun shop merchant account to be approved instantly.
First, there is no way that your application for a high-risk merchant account would get approval ahead of a low-risk merchant account.
A low-risk merchant account normally takes about a day or 2 to open. However, through various (PSP’s), payment service providers, and (PayFac’s), payment facilitators, low-risk businesses can occasionally get approved to accept payments immediately.
The sale of firearms requires a detailed investigation process into the business practices as well as a background check on the owner of the business.
Before anything else, you need a go-ahead from underwriters working on behalf of high-risk merchant service providers and payment processors.
After that approval, you will require further approval from the acquiring bank.
This is where you are most likely to experience any form of delay.
Most gun-friendly payment providers have their own requirements for deciding who they should approve for firearms merchant accounts doing online gun sales.
It is simply impossible to have your application approved instantly.
What Underwriters Look for in an Online Merchant Account Application to Accept Credit & Debit Cards
Underwriters learn a lot about your business just by looking at submitted documents.
They might seek more clarity by inviting you for a sit-down discussion or will ask you to send additional documents.
All in all, underwriters want to know if your business is legit and confirm that you did not cut any corners.
If you are looking to speed up your approval process, send your application to a merchant account provider with proven expertise and experience in the firearms industry.
Their response time will be shorter.
Try to over-deliver on the documents you are expected to submit with your application. This does not mean you should include irrelevant paperwork.
This means including documentation that improves the chances of your application getting the green light. This is particularly important if there are concerns over your application that you want to clarify.
What Can Raise Red Flags On Your Application
Underwriters are looking for signs to determine if firearm merchants pose a financial risk. Factors used to determine business risk include:
- Credit scores
- A lengthy history of chargeback ratios
- Credit card processing history
- Bad customer service
- Late payments
- Unpaid bills
- changing multiple processors within a short period of time
- Unhealthy bank account balances
- Different merchant accounts on bank statements
- Sharing an account with another merchant
- Bad press
On the other hand, more lenient underwriters might ask for a detailed explanation.
These issues are far from deal breakers. However, it is important that you declare them before putting in your application.
If underwriters find out anything unpleasant about your business on their own, the impression they get is that you were trying to hide it from them.
Tips for Online Firearms Merchant Account Approvals
There is no specific strategy for a successful firearms merchant account application. But there are certain things that can improve your chances.
The first thing to do is to look at your credit. Before you submit an application for the sale of firearms, sort out all pending payments.
Get a credit report from TransUnion, Experian, or Equifax and have all your financial issues resolved.
Secondly, be honest about any financial problems you might have, including accounts that might have been terminated in the past.
It is difficult to keep your financial woes away from prying eyes. If you come clean with your financial challenges, it puts your business under a good spotlight—it boosts your credibility as a firearms seller.
Thirdly, keep an open mind and be willing to pay higher fees for a high risk merchant account. It is alright to accept higher fees or a rolling reserve in order to open your gun merchant account for business.
A rolling reserve or holdback are terms that account providers use to minimize risk, particularly with regards to customers asking for a refund.
It means that a high risk account provider holds on to a 5-10% merchant monthly turnover in the event of chargebacks or other losses.
At first, it might not look like a good idea that your payment is being delayed, but it is a good way to protect your business from collapsing.
A retail gun sales merchant account with a proper point of sale system will help drive up your sales and keep things organized. An online business merchant account with a secure payment gateway allows you to sell your products to people without having them physically show up. With proper chargeback protection, KYC and ATF compliant integrations, you will be able to better manage your card transactions and sales from one omni-channel payment gateway.
Additionally, credit card users are impulse buyers, with 4 in every 5 Americans admitting they buy without much thought when a credit card is in their hand.
An online gun merchant account allows you to take advantage of this opportunity.
Before applying for a firearms merchant account, you need a Federal Firearms License.
This legally binding document allows you to sell guns in compliance with state and federal regulations.
It is impossible to open a gun shop merchant account without an FFL.
And with laws governing firearm sales changing every day, make sure you choose a high-risk merchant account solutions provider that is a specialist in the industry.
Get different quotes from multiple providers. Ask questions and compare transaction and processing fees. Find out what providers charge for startups and early termination fees. Test out their customer support to find out how keen they are on helping you when you get stuck.
Please feel free to reach out to us with any questions pertaining to establishing an online merchant account for firearm sales at 800-419-1772.