If your business is considered high risk, getting a merchant account may be challenging. But with the right provider who understands your industry and who has experience in processing applications faster, approval may come quicker.
Maintain honesty about your business. A deceptive or misleading application will almost always result in disqualification or cancellation of your account.
When applying for merchant account for high risk businesses, there are certain things you must take into account. These include credit history, geographic location and business strategy.
Industry analysis is an invaluable tool for understanding your market and competitors. It can help you stand out in the crowd and expand your business operations.
Industry analysis can be extremely beneficial to any size organization or new small business venture. Not only does it assist in deciding where to allocate resources, but what type of products and services to offer as well.
Conducting an industry analysis typically involves SWOT analysis and Porter’s five forces model (competitive rivalry, supplier power, buyer power, threat of new entry or substitute). Both these tools provide valuable insights into your industry and its dynamics.
Personal Credit History
Personal credit history is one factor underwriters consider when deciding whether or not to approve your business for a merchant account. It isn’t the only factor they look at, but it does help them assess your risk level.
Bad credit can arise for many reasons, but the most prevalent is chargebacks. Chargebacks leave banks holding hundreds or even thousands of dollars on a merchant’s account.
When banks examine your personal credit, they want to see that you have demonstrated responsibility in repaying debt and making timely payments. Furthermore, they check to see that there are no liens or judgments against you listed on your report.
Your personal credit can help you in the process of securing a merchant account for your high risk business venture, but it could also hurt your chances of approval. Therefore, it’s wise to work on improving your credit score as soon as possible before applying for such an account.
Business Credit History
If your business has been identified as high risk by banks and best merchant services providers, getting a merchant account may seem like an impossible task. This is because acquiring banks and processors have their own unacceptable lists based on the industry you operate in and your business history.
Entrepreneurs often face a frustrating experience when searching for an appropriate merchant provider. Not only does it feel like their financial status has been adversely affected, but the search itself can take up valuable time.
Bank statements provide detailed information about your banking transactions, such as deposits, withdrawals and checks. They also show the account’s starting and ending balance, details of each transaction, when they were made, when they were recorded, any fees charged and more.
When applying for a merchant account, bank statements are one of the most essential documents to submit. They give the acquiring bank an accurate overview of your financial situation and help them decide if you represent a good risk to them.
Before applying for a merchant account, make sure your personal and business credit histories are in excellent condition. A clean history will make you stand out from other applicants and demonstrate that you are an ethical, responsible businessperson.
Acquiring a high risk business merchant account can seem intimidating, but with some preparation it can become much simpler. Follow these tips for an easier application and more successful approval results.