Every business owner – especially those in high risk industries – that looks forward to underwriting his merchant account must be willing to put in necessary effort if the process is going to be successful. Important and detailed information regarding the business must be adequately provided because the more details the underwriting firm has about the business in question, the better the assessment they can conducted on it and hence the greater the chance of approving such business.
However, if your business falls within high risk industries such as collections, you might need to go an extra mile if your underwriting is going to be approved. This is because industries like the collection industry have been defamed by the rebellious activities of some businesses within the industry. As a result, banks and other underwriting agencies have imposed greater restrictions for the underwriting process of industries as this. Their underwriting options have also been limited to a large extent.
We understand that merchant accounts are important to collection service providing firms. We have therefore come up with this piece to enlighten business owners seeking underwriting for their merchant accounts on what the entire process entails. However, you should note that different underwriting firms operate with different rules and would require different information from your business.
Not every underwriting agency is willing to work with high risk merchant accounts as they are often considered as liabilities. However, Newtek Merchant Solutions and High Risk Holding are two underwriting agencies that are willing to work with high risk industries but have nevertheless set up certain benchmarks intending merchants must meet to be approved for underwriting. For startup businesses in the collection industry, the requirements are:
While Newtek is highly experienced in underwriting high risk merchant accounts and has been found to maintain a flawless relationship with their sponsor financial institution, they are unwilling to work with dangerously risky businesses such as payday loaners, those involved in student loans and those operating with purchased debt. But this doesn’t mean you wouldn’t find an underwriting firm that can handle any of the above businesses. Be sure to enquire about the area your underwriting agency finds unfavorable.
The Standard Application for High Risk Merchant Account
There’s no shortcut to obtaining an approval for underwriting but an applicant must have a reliable credit card history as well as a minimum rate of chargebacks on transactions with customers before securing approval with underwriters.
The requirements for the process differs from provider to provider. While some won’t mind working with firms having less than $50,000 as their monthly transacting volume provided other requirements are met, others would require nothing less than $50,000. While High Risk Holdings would approve underwriting for merchant accounts with more than 1% chargeback history provided there’s no proof of an increment in future, Newtek won’t accept any chargeback ratio of more than 1%.
If you’re just venturing into the collection industry and cannot provide evidences of some of these requirements, some providers like High Risk Holdings are more than willing to approve your business for underwriting provided you have the following:
Factors Considered Disapproving in the Process of Underwriting High Risk Merchant Accounts
As soon as underwriting service providers discover through the Customer Financial Protection Bureau or the Better Business Bureau that a merchant account has a history of poor transactions with its customers, they may refuse to underwrite for such merchant or go on to request for further details.
While a history of lawsuits or negativity from the press may not always be a disapproving factor for merchants seeking underwriting, it is best they uncover such issues to their potential underwriters to avoid complications in the future. Holders of merchant accounts should be as transparent as possible to their intending underwriters as regarding every necessary details required for the process. Hiding vital information from your provider might only end up tarnishing the image of your business and maring your relationship with your provider.
Other disapproving factors include:
Further Steps in the Underwriting Process
Depending on the provider, you still have to do some work after presenting the required documents and proofs. Providers may decide to make further enquiry and this might take the form of an interview with the merchant. They do all the above to ensure they do not fall on the wrong side of underwriting relationship with merchants.
Given the exhaustive and sometimes confusing nature of the underwriting process, the need for a payment processor or a guide through the entire process cannot be underestimated.
With years of experience in guiding merchants who require underwriting, we can put you through your underwriting process by first helping you decide on the best and most efficient underwriter for your business since we have established solid relationships with a lot of reliable Merchant Service Providers. Our services also come at the best rate for your money and is according to the unique need of your business.