Merchants, products, or services that are labeled as high-risk merchants by banks must go through additional underwriting and risk assessment steps in order to get a high-risk merchant account so they can process credit card payments. If your business has been given a high-risk merchant designation for any reason, don’t despair. There are some key points regarding high-risk merchant accounts that will better position you to secure a payment processing solution that meets the needs of your business.


Be Upfront and Honest About Your Business


This might be the single most important point to remember when applying for or simply discussing your options for getting the appropriate payment processing solution for your business. You’re already a high risk merchant and high risk merchant service providers already understand that there is an increased risk in providing service to your business. Merchant services providers that deal with high risk merchants realize that the merchant, product, or service come with additional liability at the cost of the merchant service provider. Knowing that, the merchant service provider must be comfortable with the high risk merchant or high risk business in question. If you aren’t it is more than likely you will go through an unreasonably lengthy and complicated underwriting process only to be declined. These merchant service providers aren’t the FBI, CIA, IRS, or any other government agency, but they are held liable for providing you these payment processing services to high risk merchants and have every right to completely and thoroughly understand who they are doing business with. If you were in their shoes you would expect the same.


In many cases, there is more than just a credit card processing merchant account that can be done for high risk merchants and based on your company’s position there may be multiple or better payment processing solutions available to you. Letting the merchant service provider know from the onset what your company’s needs are and what position your company is in will yield the best results. However, you must always keep in the back of your head that any legitimate merchant service provider with high risk payment processing solutions will not guarantee approval.


Have the Business Owner with the Best Credit Sign


As with any lease, loan, or rental, better credit yields better deals and a higher probability for approval. Particularly when it comes to high-risk merchant service providers; they’re favorite type of merchant is a low-risk merchant with a high-risk business. Whichever principal has the highest credit rating should sign the application, but they must own at least fifty percent (50%) of the company. If not, you need signers that make up 50% percent of ownership. If there is only one owner or the combined ownership doesn’t have strong credit; it is very smart to line up a guarantor. High-risk merchants should also be prepared to sign a personal guarantee if necessary.


Have Additional Documentation Ready

As a merchant you will need to provide supporting documentation to accompany any completed and signed application. You need to provide:

  • Bank Statements
  • Void Check or Bank Verification Letter
  • Articles of Organization
  • Tax ID (SS4 Form)
  • Legible Copy of Identification

However, when it comes to high-risk merchants you need to provide additional information some of which include but are not limited to:

  • Additional Months of Business or Personal Bank Statements
  • Audited Financial Statements
  • Multiple Years of Business or Personal Tax Returns
  • Other Financial Documentation
  • Licenses or Accreditation
  • A Utility Bill
  • A Website or Marketing Information
  • DBA Filing
  • Existing Processing Statements

You may need to provide all, some, none, or more than this depending on varying factors of risk assessment done during the underwriting process. The business bank statements should come from the account listed on the application and include all pages. Any existing processing statements that deposit into that bank account should accompany the application as they will be required in their entirety as well. Keep in mind, merchant service providers can identify all merchant accounts depositing into any bank account from the bank statements.


You don’t need to offer these documents unless you’re asked to, but you should be prepared to submit them in a timely manner. Especially if you’re pressed for time as it will certainly delay the application process. The best advice we can give is to refer back to our first point. If you are upfront and honest the merchant service provider can typically tell you most, if not all, required supporting documentation before you complete the application.


Be Prepared for Delays


It usually takes longer for a high-risk merchant account to go through the application process than it does for a low-risk merchant account; even if the high-risk merchant has all of their documentation prepared in advance. This is mostly because the underwriting process is simply longer for high-risk merchants. Because banks have more documents to look at and more data to consider, processing times can take multiple days or longer for high-risk merchant accounts. This is not always the case but the simplest way to understand this is that a retail restaurant where the majority of card transactions are swiped is inside the restaurant are considered a safe, low-risk merchant and require little to no underwriting whereas tobacco merchants, adult merchants, e-cig merchants, firearms merchants all require additional underwriting steps and measures because of the products and services sold.


It’s not always about the Best Rate – but it Definitely Helps!

Yes, you want to get the best rate and pay the lowest fees possible and if you shop around you will be able to distinguish who has the best rates. You should get written quotes and compare offers from multiple high-risk merchant service providers in order to see who will offer you the best cost savings.

Shopping around is important when looking for a high-risk merchant account for two reasons. First, high-risk merchant account rates are higher when compared to low-risk merchant rates, there is no getting around that unless you lie to the merchant service provider or bank and that simply is not worth the long term risk of being placed on TMF or MATCH just for a short term monetary gain. Second, each high-risk merchant service provider has different banking relationships. Each of those relationships has unique pricing and underwriting criteria that alter rates and fees on an individual merchant basis.


The time taken to shop around is well worth it if you’re the type of entrepreneur that prefers to keep as much of your money as possible in your possession. After all, even a fraction of a percent can makes a huge difference depending on monthly transaction and dollar volume.


But you said it isn’t always about the Best Rate?


Correct. Sometimes it is more important to have a merchant service provider that has a thorough and complete understanding of:

  • Your financial position
  • Your business type
  • The products and/or services sold
  • Your billing model
  • Your goals and objectives
  • Threats your business or industry faces
  • Strengths of your particular business
  • Weaknesses of your particular business

Understanding these and other aspects of your high-risk business can provide greater value than cost savings at times. Knowing you are working with a merchant service provider that treats your business as a partner more than a client can alleviate potential headaches associated with monitoring and managing payment processing solutions while allowing business owners and management to focus on greater priorities such as customer service, daily business management, and capitalizing on growth opportunities.


The Bottom Line


If you have a high-risk merchant designation it shouldn’t be difficult or overly expensive to get a high-risk merchant account. Keeping each of these points in mind should provide you with reasonable expectations and you should be able to apply over the phone once you find the right high-risk merchant service provider to meet the needs of your business. All in all, it should be a painless process.


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