When the economy gets shaken as it did this past year, there’s obvious fallout that gets a lot of press. But there are other subtle things that you don’t hear as much about. We’re seeing this with banks and approvals right now, and it’s something that any merchant who wants to open a new merchant account in order to process credit card payments should be aware of, especially those in the mid to high-risk space.
In short, here’s what’s happening. These days it seems it’s harder to get approval for merchant accounts. That means that anyone who is looking to open a new account, whether they’re starting a new business or just looking to switch banks, should be extra careful about getting things lined up ahead of time.
It helps to understand the big picture. Retail dropped. What does that mean? Retail and card-present transactions are traditionally considered to be on the safer side compared to eCommerce, which gives a sense of anonymity and increased potential for fraud.
Banks rely on these safer transactions to offset some of the risk, associated with the more moderate and high-risk accounts. When this becomes out of balance, the banks' willingness to take on risk declines. Even though the economy is projected to recover, there is still uncertainty and a lag.
As a result of this last year, more banks are raising the bar for individuals and scrutinizing these deals much more closely.
What does this mean for merchants? Like always, you need to be prepared before starting the process. Expect to face more due diligence and be ready with all the right paperwork.
Think of this sort of like a credit card application. You want to show financial stability. You basically need to show the bank that you have a solid business with good revenue potential and the reward will be worth the risk.
Chances are, you will be asked to provide both personal and business financials, so it’s good to have both ready to go. Make sure the business is funded accordingly and there’s enough money in the business account to cover any start-up costs associated with your business. The processor that is considering whether to approve your merchant account will want to know that your business is sustainable. Even if you have enough money in your personal accounts, it’s a good idea to move some funds into the business account to ensure the bank can see what you’re willing to allocate towards your company.
Another thing to consider, It can’t hurt to have at least a basic business plan or marketing overview to show realistic revenue expectations.
As you go into the process, look for a processing partner who understands the marketplace. Multiple banking options are key. You want someone who has the right relationship with the right processors so they can find the right fit for you based on your individual needs. This should be someone who can negotiate with the bank on behalf of your business to get you a fair and flexible arrangement.
If you come in prepared and with the right partner, you shouldn’t have a problem, even in these uncertain times.