If you are in search of a way for your business to start accepting payments with credit cards, then you will typically have to make an application for what is called a Merchant Services account. In the majority of cases, this will involve credit checks to find out whether you qualify and the amount you qualify for in association to processing payments each month. If you happen to have either no credit or bad credit, there will still be options available through the “high risk” providers for merchant services such as Charge.com. As you proceed to process payments every month, the processing volume amount available to you will increase.
There are high risk levels for the merchant providers when they take on the approval of new merchants. For example, charge backs that arise when customers disagree on or dispute an activity on either their debit or credit card, which is followed by a request for a refund from their credit or debit card provider. These types of refunds will be debited against the merchant service provider along with the partner bank, which creates a significant amount of potential liability.
Tips On The Best Way To Get Your Merchant Account
Below is a list of the items you will typically need to open your merchant account:
For LLCs and Corporations:
• EIN Number, the EIN number which stands for Employer Identification Number and is used by the IRS to identify your business
• A Legal entity, when setting up a business you will require a legal-entity. This includes a C-Corp, LLC and more
• Business Checking Account, this is the type of account that provides a way for the merchant service provider to deposit any transactions into the business-checking account
Once you have finalized these 3 requirements, you can begin an application process which is required by the merchant service company you have chosen. The sole proprietor will only need their personal name, personal bank-account and Social Security Number.
Factors That Can Decrease Your Chance Of Obtaining Approval For Merchant Accounts
In relation to the risks that the merchant-service providers and the partnering banks take when approving a merchant for a merchant-account, specific factors contribute to making it difficult to open one of these accounts. Here is a list of some of these aspects:
• New Companies
The newer companies that have only been in business for a short time are regarded as higher risks when compared to a company that wants to change their provider
• Bad Credit
This happens to be the most popular reason for a decline of an account, but there are still other providers such as Charge.com who work alongside the higher risk applicants
• Industry Type
The business type that you own can also contribute to raising red flags. For example, the industries that are associated with abuse by other companies, can also make it difficult to obtain your merchant account. Some of these industries include: ammunition and guns, pornographic websites, gym memberships, affiliate-marketing companies, recurring billing products and so on.
Your Expected Transaction Volumes
When applying for your merchant account, where you tell the provider you will require a processing volume of high levels, the likelihood of you obtaining the account will diminish greatly. This is due to the higher volumes been attached to an increase in charge backs which poses a greater risk to your chosen merchant-service provider. Make sure you apply only for a processing volume associated with the expected volume. It is advisable to be conservative in the way of asking only minimum that you will require. If the volume increase, you can apply for an increase in the volume at a later stage. As you start to build-up trust with the provider, they will eventually provide you with just about an unlimited processing-volume.
Submit Detailed Lists Of Business Activities That You Conduct
The merchant-servicer provider will want to examine your business activities to ensure you are business operations are legal. The partner bank will also ask for your financial statements and tax returns to approve and complete the application.
Your Average Ticket Size
In the majority of applications, the provider will request information on your expected ticket size. Avoid indicating an average that is high, as once again your chances of approval will decrease. Larger transaction sizes translate into higher costs in association to the charge backs, which means the risks increase for the merchant service-provider along with the bank.
Obtaining your own merchant account is possible when you follow the tips and advice mentioned above. Once you have obtained approval for your account, ensure that you maintain customer services to decrease or avoid the amount of charge-backs. Making sure the merchant account remains in a good-standing is essential in regard to the success of the business over the long term. Failure to keep up a good financial relationship with your provider will mean it will be far harder to obtain another account into the future.
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