The Value of Merchant Accounts
Every e-commerce business owner knows they must have a merchant account for their online business to succeed. Nowadays, there are many options out there to choose from. Depending on the needs of your business, a merchant account for e-commerce stores offer flexible payment options for your customers so that they can smoothly, and securely, do business with you. Merchant accounts also make your business scalable and ready to accept all kinds of different income opportunities. Finally, it offers security and peace of mind for customers when checking out, and for the business owner, it is a secure place for holding all customer transactions.
Applying for a merchant account, though, is not necessarily a walk in the park. Providing confidential business formation documents, proof of liquidity, bank statements, business income, and transaction histories is just half the battle. Convincing them that your company is sustainable and profitable in the long term is the crucial part. Many business owners reading this know that not every application makes the cut, unfortunately.
Five Reasons Why Your Application May Be Declined
One of the best ways to ensure success in any new endeavor is to learn from the mistakes of others who came before you. Here I have compiled five common reasons why your merchant account application gets declined:
1. Your documentation of your business affairs is shabby. It is absolutely critical to give your bank the most accurate summary of your business with company documents, bank statements, chargeback rates, sales volumes, etc. If you are not a business administration or financial expert, you could end up getting confused and submit incomplete documents.
2. The description of your business that you submit on your application does not add up. Since you are describing your business to strangers, it is important that your numbers add up for the products you are selling and the type of business you are running. For example, if your average ticket size is $10,000 and your monthly sales volume is $300,000, it may raise some eyebrows. Additionally, if you are applying for a million dollars a month in processing volume for a part-time, start-up business, your application might be flagged and potentially declined.
3. Your personal credit score is not great. Since a merchant account for a business is similar to a credit line, a healthy credit score for the business owner is golden. The banks want to know that you and your company are in it for the long term, and if you have a long history of unpaid debt or failed business ventures, it just might scare them away.
4. Your business has a bad public reputation. Although customer complaints are inevitable, having more bad than good reviews might hurt your application. Yes, the people processing your applications will look this stuff up! Luckily, there are customer service strategies you can advertise on your application such as having a dedicated channel for answering customer queries and concerns and encouraging customers publicly to use that channel. Prevention is better than cure.
5. Your business is considered “high-risk”. This is one of the most common reasons for declining an application. The truth is, some businesses are considered “high-risk” just because of the nature of their products they are selling. For example, recurring subscription packages, software solutions, and nutraceuticals are all considered “high-risk” in many bank’s eyes. These industries have been flagged by merchant processors as high risk because of difficult product tracking (products that are not shipped and physically delivered) and high chargeback ratios. High chargeback ratios are avoided by most banks for two reasons. It could hurt their finances if there are too many chargebacks outstanding and the business decides to close because they cannot pay their debts. Also, it might hurt their reputation with credit card companies and other banks if they are seen as processing transactions for too many risky, and costly, businesses.
Expert Account Handling and Risk Management
Managing your business to avoid all these risks, and regularly reviewing your financial records can take precious time away from focusing on building your business and finding quality products that sell. That’s where I come in. I will work with you from the very beginning, securing everything you need to get your merchant account approved and helping you create a plan to mitigate chargebacks risks. My 11+ years of experience with e-commerce merchants with unique business models will be invaluable when I give you advice on how to create a successful application.
I know what banks are looking for, what questions need to be answered, and exactly what to say to ease any concerns the bank may have. Even after your account is approved, I will help you mitigate risks so that your account stays healthy. I will give you sound business advice on emerging trends I am seeing from some of my other clients that will work for your business model. I will provide best practices on customer service to manage your chargeback ratios, and we will regularly review your financial health together. I am all about creating and maintaining a good relationship with your merchant account provider, giving you the opportunity to get the best rates and terms possible. Let me help you with the details so you can focus on the bottomline and get back to growing your business on your terms.