Many merchants are still in the dark when it comes to the process and what is actually required to obtain a merchant account.
And when it comes to finding the right merchant account, business owners will find themselves immersed in new, sometimes confusing jargon used within the payments industry.
Another issue that business owners will encounter is that merchant accounts actually have a very thorough underwriting process. It is through this process that informs whether the merchant account is accepted or denied.
What Is Merchant Account Underwriting?
Since the acquiring banks are the ones who are shouldering the burden “on behalf” of merchants, they take great lengths to lessen this risk by excluding any businesses that fall under high-risk categories.
Merchant account underwriting requires a thorough analysis and meticulous evaluation of applications submitted by merchants. Acquirers are the ones that carry out this analysis mostly to confirm that businesses are viable, trustworthy, and meet basic criteria.
The 6 Merchant Account Underwriting Criteria
So before a merchant sets out on the path of finding the perfect merchant account for their business, they must gain an understanding of what, exactly, the merchant account underwriting process entails. That way, a merchant is armed with the right information and prepared to meet these requirements successfully. Here are the six criteria that merchant account underwriters use to confirm that the business is viable, trustworthy, and has a chance of getting approved:
- Must-Have A Business Bank Account
When you have a designated bank account for your business, it speaks volumes about the seriousness of your business. Your financial report should be separate from your personal expenses. Keep your balance at a healthy level and your “overdrawn balances” to a minimum.
- Financial Documentation
Financial statements and processing statements are used to create an overall picture of your company’s viability. Records that also track a regular “transaction flow” for example, can give underwriters an accurate picture as to how you handled chargebacks and the steps you took to lessen fraud.
- Define Your Business Structure
When you take the time to register your company as a limited liability company (LLC), a sole proprietorship, a partnership, a cooperative, or a corporation, this demonstrates to acquirers your “legitimacy” as well as your “legal standing”. You also need to be sure you feature your Employee Identification Number (EIN) to file your business taxes.
- Maintaining PCI Compliance
One of the most important requirements for accepting credit card payments as well as mitigating potential fraud is to be PCI Compliant. By following these guidelines, you can ascertain your business’ security. Using the latest and up-to-date software can further shield you from any data breaches.
- More Supporting Documents
Underwriters may take things a step further and require you to furnish your business policies documentation that outlines your shipping, billing, returns, and refunds. Best practices require companies to communicate reasonable timelines for customers to receive their goods and offer high-quality goods to avoid any type of reimbursement.
- A Complete Application
Although the application will feature all the aforementioned requirements and criteria for approval, it is still critical that the application itself is completed thoroughly. Underwriters also pay careful attention to the way you fill out your application. They are especially keen on it being complete, accurate, and professional.
Don’t Remain In The Dark
Merchants have a lot on their plate as they navigate the complex and sometimes the topsy-turvy world of entrepreneurship. Getting a merchant account approved is most definitely the golden ticket to accepting payments and growing their business.
However, none of this is within reach if merchants do not prepare for what is required of them to get a merchant account approval. It is best to get familiarized with the underwriter’s requirements to ensure a higher chance for approval.