WHY IT IS DIFFICULT FOR A STARTUP TO GET A MERCHANT ACCOUNT?
While setting up a business, one of the biggest challenges faced is getting approved for a merchant account. And it is a very crucial and important part for any business as it handles the flow of money. If you want to accept payments from your customers online through credit/debit card then getting approved for a merchant account is a must.
There are several reasons why it is difficult for a startup to get a merchant account:
- High risk involved new concept for the market: As you are a start-up a lot of risk is involved because it is hard to predict whether your business will be able to make its place in this tough competition or not. And if you have a new concept then will it be successful or not. Any financial institution or merchant account provider avoid new businesses because they don’t want to take extra risk and wait for the growth of your business.
- No credit card history: If as a start-up you do not have a credit card processing history it becomes difficult for your business to get approved because your credit score works as a proof that you are a legitimate business, you have a healthy growth and it shows your ability to repay your debt on time. It is important for financial institutions and merchant account provider because if merchant is not able to pay back the chargebacks, they are responsible.
- Chargebacks and fraud prone: A new business is highly prone to chargeback and fraud because fraudsters hope that business must haven’t implemented a comprehensive fraud protection and fraudsters take advantage of this security negligence.
- Operating history: As we know, experience makes us better. Financial institutions and merchant account providers also believe the same when it comes to approving a merchant for merchant account. Your years in business show your capabilities of running it and dealing with risks and challenges involved. It is impossible to know if a new business will succeed or fail.
- Nature of business: Your approval can also become difficult because of the type and nature of your business. There are some business types are flagged as high-risk industry by banks and merchant account provider. For instance, online gaming industry, travelling industry, CBD oil industry, forex industry etc.
- Capital shortage: A good amount of capital is required to set up a business and also after setting up. Usually startups have lack funds which make merchant account provider and bank nervous because they require a certain amount of capital in a merchant’s business bank account.
HOW TO GET A STARTUP MERCHANT ACCOUNT APPROVED EASILY?
By now you it must be clear to you that why it is difficult to get approved. Though, it is difficult for a startup to get approved for a merchant account but it is not impossible. By taking the following measures your startup can get easily approved.
- Be honest: “Honesty is the best policy”, you must have heard this proverb many times and now this policy only will help you to get approved for a merchant account. Never lie to your merchant account provider. Be honest about your business information and its past. Clearly tell about any previous merchant account (if any), bankruptcies, or any other issue with your business. It will help to build a trustworthy relationship and also legally you cannot hide information which is part of the public record.
- Provide as much relevant information as possible: For a new business it is impossible to show its willingness to deal with frauds and chargebacks because they don’t have any operating history. There’s only one way to convince your merchant account provider by providing maximum information. Here is the list of things you should provide to proof your legitimate and profitable to deal with.
- a) 3 months prior copies of bank statements.
- b) Voided check copies.
- c) Driver’s license or passport to prove that businessman is not a fraud.
- d) Any utility bill with address of either business or owner’s.
- e) Business license, tax returns, articles of incorporation.
- f) Any certification or copies of vendor contacts.
- g) Pictures of facilities and inventory, sales scripts
- h) Describe about your products, services offered and future plans and strategies which can show that you are a smart entrepreneur who can run a business as well as face future challenges.
- Set your mindset to pay a little higher: Not every merchant account provider will be ready to provide a merchant account to your business. So, if you find a suitable merchant account for your business then grab it even if it costs you a little higher because it is worth it. It will help your business to expand and attract more customers from all over the world.
- A business license is must: You need to have business license either you are a sole proprietor or in partnership to open a merchant account and it also work as a strong evidence of your authenticity which will help you to get approved easily. So, if you haven’t got your license yet then get it before applying for a merchant account.
- Healthy merchant’s personal account: For a new business, if you don’t have any processing history then owner’s personal or business bank account can also help indirectly. On application new business owner can get a favorable review from the bank. It is then become important for you to maintain a healthy bank account which is free from any penalties.
- Provide current processing statements: Other than anything attached with your application will not make as big an impact as your current processing statements for the last 3 to 6 months. If you can provide current processing statements, it will help financial institutions and merchant account providers to understand your processing volumes, chargeback history, and your working style.
- Good presentation matters a lot: Application that you will be asked to fill out to apply for a merchant account makes the first impression of your business. So, make it a good lasting impact. Only ask for what your business actually need. If you will ask for processing a much bigger amount than you actually need, it might knock you out. Once you get a merchant account you can increase the processing volume by maintaining good credit processing history. Fill only authentic information in the application. And in case they found something iffy in your application they will reach you out, at that time explain it very professionally. You have to make your business look established and you really know how to run it.
- Do a good homework: Get complete knowledge about your business industry. Many industries are considered high risk and you should know about the risks involved in your business. By this you will save your time as well as merchant account provider’s. Not every merchant account provider deals with high risk industries, so obviously you will not get approved if you will apply in a wrong one. Understanding your business will help you discover the type services you should expect from a merchant account.
- Research properly and find a suitable merchant account provider: Make it very clear that not every merchant account provider deals with startups. New businesses need extra attention and security which can only be provided by an experienced payment processor like iPayTotal. Talk to various different payment processors and ask as many question u want to without any hesitation. Go through the reviews, know about customer feedback, get full knowledge of all the fees and charges and then take the final decision.
It takes the right merchant account provider to approve a startup for a high risk merchant account. IPayTotal has decades of experience and has been working really hard with professionals to get you the best payment solution which is suitable for your business. 24/7 customer service is available for you so that you can clear all your doubts. Your new business should be in the right hand from the beginning and there’s no better option than iPayTotal.