First- time owners of high-risk businesses will find the process of applying for a high-risk merchant account intimidating. Their biggest fear being that the application will be declined.
Since merchant account providers are trying to avoid having a high element of risk, they will need to determine and avoid these before undertaking to take a chance on a high- risk merchant. They do this by evaluating the business itself against other information provided by the applicants.
What constitutes a high- risk business to merchant processors? This is determined by a number of factors, namely: companies with high chargeback rates (reversal of funds to clients), low credit facilities, or companies with reputational risks (e.g. bankruptcies).
Often, applications are declined because some companies take the wrong approach when applying for approval. By knowing how to avoid complications, the application process for a merchant account can be less time consuming and stressful.
These are the top 5 reasons for merchant account declines:
- HONESTY IS THE BEST POLICY:Sometimes, merchant processors decline an application because the applicant lacks the honesty in doing business ,Every piece of data or information about your past credit history needs to be provided. This includes any lapses of payment in the past. And even though these lapses may look bad, it will be worse if you leave it out intentionally and your provider finds out.
Everyone’s credit, history is available to all lenders and providers at all times for checking purposes. In case you need someone to sign deposit for your high-risk payment gateway accounts, then you need to make sure that they, themselves, have a good credit history.
Most merchant processors will require that the individual signing in has a major position, partial or title ownership within the company if it is registered as an LLC or corporation. Meanwhile, if you have a high-risk merchant account termination history with another bank, your name or business will definitely appear on the TMF Match List, a “blacklist” that processors use in order to determine which businesses pose a high credit risk.
Any outstanding bills or fees to a previous provider gives you no chance that your current application will be approved. High-risk merchant account providers are always wary of issues that may lead to merchant fraud. And if there is even a slight hint of such thing, your application will presumably be denied.
PAY OVERDUE TAXES:
In case you have a tax lien against a particular property, merchant processors will immediately consider you as a high-risk candidate and your application won’t proceed.
The only thing you can do is to first resolve all liens before you start a merchant account application with any providers.
There are some kinds of businesses considered to be extremely high risk. This is why some banking institutions and providers have a list of prohibited businesses. These kinds of businesses, because of their nature, most account processor will immediately decline your application.
For some who accept, merchant accounts for high-risk industries, they typically require a higher processing fee and charges in order to help cover the risk that a merchant account processor has taken. If a business needs something than the ordinary business license— for instance, online pharmacies and online gambling sites— they will need to provide licensing in order to qualify for high-risk merchant accounts. Otherwise, applications will be denied.
YOUR BUSINESS NEEDS ;
If you’re just starting out, then you might not know exactly what you need to request from a merchant account provider. A high-risk credit provider is based on expected volumes based on past interactions with other clients.
And if you ask for more than that considered “norm” for your kind of business, then your application will probably be denied.
For such situations, a merchant broker can provide you with the best advice. They should be able to determine your startup’s exact needs and will help you find the best high-risk provider that offers the best benefit for your kind of business.
And if you own an old-standing company, then you need to base your processing amount to realistic expectations. It needs to be taken from the recent growth forecasts and volumes of your company for the next 2 quarters. This should provide your merchant account processor a realistic figure to work on.
WRONG MERCHANT ACCOUNT PROVIDER
If your application is denied and the reason does not lie on paperwork or your credibility, then it must be because you went to the wrong provider. There are some merchant account providers that are not keen to offer credit to some kinds of business. Others will steer clear of particular products, while some don’t want to take the risks with startups.
So, ask around before you decide on which merchant account provider to give your applications to. Your chance of being approved will be higher and prevents wasting time if you go to a credit institution best suited to your needs.
Most high-risk account providers have great reputation, however, it does not mean that their services are suited for your company. So, do your research online and ask colleagues or other businessmen about the providers that you’re interested in. Read through their requirements and policies and only submit an application if they meet your criteria.
If your application for a merchant account was declined, then you need to find out why. This makes it easier for you when reapplying. Be optimistic and see this a great opportunity to look for other options that better serve the needs and interests of your business.
Before you fill in an application, ensure that you have all the required documentation. These may include:
- Decline rates
- Updated monthly statements of your company
In case you have previous issues with any account processor, then you should take some effort and time to resolve them. They will expect you to:
- Never exceed the normal requested volumes
- Ensure that your clients can contact you as needed
- Promptly respond to client’s requests
Like any other kind of application, it is best that you proceed with a well-thought plan. You can prepare by doing research on which high-risk provider you can apply to. Determine the required documentation and take the time to make sure that there will be no issues.
Lastly, remember to be always honest and credible so you can be successful in what you’ve set out to achieve.