Applying for a merchant account can become an intimidating process, assume especially if this is your first time in the marketplace.
Merchant processors or banks, it depends on who you are applying to, there is a risk to provide you with merchant processing capabilities, and therefore it has an approval process involved. The application process evaluates your business information in order to minimize their risk.
What risk is there you might ask? When businesses suffer bankrupt or have a huge amount of chargebacks, this introduces financial risk and liability for merchant processors. Also, upstanding businesses like yours are not the only ones trying to get approved to debit/credit cards merchant accounts. It is a brilliant opportunity for fraudsters. So, banks and merchant account processors do their homework before any kind of partnership.
While proceeding through this process, you will get to know about the top reasons why merchants fail to obtain approval, and how to avoid those complications in your application process form.
1. Personal credit history or active collection accounts
The personal credit history for the signer on the account is usually checked and will affect the decision for the approvals. If you have multiple people who can sign for your business, be confirmed to utilize the ones who know that they have a good credit history. Merchant processors usually require that the signer for the account be a person with some percentage of ownership, an officer or a manager or someone with a major title if the company is registered under an LLC or Corporation.
2. Liens for Active tax
Personal or business related tax liens are often considered a high-risk situation for any processor and will definitely stop the process in its tracks. Resolve all liens before starting a merchant account application.
3. Restricted business types
Most merchant processors have a list of companies and businesses that they generally will not service due to their traditionally high-risk nature. It is the bank’s method to protect its interests. Do not take it personally if you are declined for being a prohibited business type, but do be aware that high-risk business types result in higher processing fees charged to the merchants to help cover the risk that is being assumed by the processors.
If you fall into the “high risk” category and are having trouble in getting approved, try exploring other options by doing an internet search for “high-risk credit card processor.”
4. Types of businesses do not match processing volumes
Each and every merchant account application requires the merchants to apply for their expected volumes based on past processing and expected growths in the near future. Every processor is excited for your business to grow, processing amounts outside of the norm for your industry will probably hurt rather than helping your odds for getting approved.
Make sure of evaluation of amounts for your business processing based on your recent volume and based on your expected growth in the next 4 to 6 months in order to develop a realistic, but optimistic numbers.
5. Business should be Present on the MATCH list
The TMF Match List is like the blacklist of merchant processors. Being on this register determines that another bank has terminated a merchant account with a merchant and has raised a red flag to the all systems of banks that you are at credit risk.
To avoid this problem, make sure that any previous merchant account under your name was left in good standing position. If you have any bills or fees owed to a previous provider, ensure that those are paid before getting approved for another account or you may not get the approvals.
Merchant Account Underwriting
There are other reasons as well your name might appear that requires more time and involvement to fix or resolve, to avoid High-Risk situations with any merchant processor and to keep your merchant account in good standing position:
- Provide all ways for your customers to contact you
- Always promptly respond to the customer requests
- Should process within your normal requested volumes
One should treat this process like any other process where he is under review (think of applying for a loan or a job). Your best challenge is to keep bridges unburned, and to be as upfront as possible, and remember to do your homework before starting your merchant account application. Save yourself from time loss and frustration.
Making no mistakes credit card processors want nothing more than to approve your merchant account application. From the sales agent to the underwriting department and to the acquiring bank, every single person you interact with or are in touch with is trying to help activate your account as soon as possible so that they can begin to collect a percentage of your credit card sales, it is equally important for them to get your accounts up and working. Payment processors get no satisfaction out of denying your application, they waste more time and money on a failed application than you do.