How Much Bad Credit Can Cost Your Business

Feb 19, 2014

Suffering from a bad credit score can feel like having someone put your only car up on cinder blocks—all of your efforts to move forward are sabotaged before you even get started. How can you convince anyone to get on board with your business venture if your bad credit has taken the wheels off your financial prospects and capabilities? The cost of bad credit can be staggering and yet somewhat unidentified. How much precisely does a bad credit score cost you? Even with mitigating factors like a specialized bad credit merchant account, a poor credit score can cripple your finances for years to come.

Where does bad credit hurt?

Financial common sense indicates that bad credit hurts you with higher interest rates, larger deposits, and expensive premiums, and it can limit your ability to apply for and receive quality financial services. It’s like having something constantly corroding the foundation of your business, creating lots of little cracks and draining expenses that destabilize your business. A high-risk, bad credit merchant account will also have higher fees and interest rates than a normal merchant account from a merchant services provider. These costs pile up month by month and year by year, hurting your bottom line.

Analyzing Bad Credit and Credit Cards

Let’s take a look at a case sample where bad credit can cripple your business: credit cards. A general-use credit card averages a 15% rate depending on the card issuer. If you have bad credit this rate can balloon up to 30%. Now let’s suppose you owe $5000 in credit card debt—not an exorbitant amount by any means. Over 27 years, making the minimum payment at a 15% rate will run you $12,000 in order to pay back your debt. At 30%? You will pay back $132,000 over 30 years. That is a lot of damage for your business’s bottom line to absorb.

Handling Bad Credit

Bad credit reaches into other areas of your business aside from credit cards. If you choose to take out a mortgage instead of leasing, if you need to make a deposit to cover chargebacks with a bank, or if you need to open a merchant account you’ll feel the pain and damage from bad credit. You will feel like you’re stuck up on those cinder blocks. The only solution to bad credit is to make your payments and rebuild your credit. Find a specialized bad credit merchant account with the best rates and fewest fees to jumpstart your revenue stream so you can begin making consistent payments.

Bad credit is crippling for small business owners but it is by no means a death blow; you can get the wheels back on your business and start it rolling towards a stable financial future.

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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