Being a high risk merchant does have its challenges, especially when you are trying to secure a payment processor. The reality is that most payment processors don’t want to carry the risk that a high risk business entails.
Typically, high risk businesses are more likely to attract chargebacks and fraud. This means that any costs associated with this will likely be covered by the payment processor.
Is My Business High Risk?
There are a variety of ways that processors and banks make the final determination as to whether or not your business is high risk. Here are just a few:
- If your business type is highly regulated by the government
- If your business is likely to default on a loan
- If your line of business has demonstrated a high chargeback rate or fraud
- If you have a low personal credit score
- If your products or services are of “questionable legality”
5 Tips To Ensure You Secure The Best Payment Processor
Before you begin your search in finding the best payment processor for your high risk business, you must thoroughly do your homework. Take time to research a processor who actually understands the high risk industry, especially your particular line of business. Also, look up reviews online, ask fellow colleagues. Once you have narrowed it down to a few, research their contract, their fees, and their customer support.
After that, it’s time to prepare yourself for the application process. But before you move forward with a decision, you must have some critical things in place. This will save you time and headaches when it comes to choosing your payment processor and increasing your chances that your merchant account will be approved.
- Come Clean With Your Payment Processor
Do know that your underwriter will audit your company and therefore you are not doing yourself any favors by withholding critical information? Be clear and honest about the type of business and products/services you are offering. By not doing so, you risk your account being closed.
- Demonstrate Your Assets
If you happen to own inventory, equipment, tools, buildings, all of these items are potential, money-making resources. This also communicates to the payment processor that you do have some capital to cover any loss.
- Accept Your Business Risk
Unless you have had a previous experience with payment processors, the reality is that you must embrace the terms and conditions that most high risk payment processors provide. The good news is that, once you have gained some traction and good reputation, you do have the possibility of revisiting your terms and conditions and perhaps negotiate better rates.
- Steer Clear Of Transaction Limits
If possible, try to find a high risk payment processor that does not impose transaction limits. By exceeding these limits, you will be charged a penalty fee. This is greatly limiting as you grow because transactions will naturally go up as your business expands.
- Ask About Their Reserve Limits
One of the many ways that processors protect themselves from risk is to take a percentage of your earnings in a reserve account to cover any chargebacks. Sometimes these percentages can be as much as 15% to 20%. This can place a serious toll on your earnings. Do aim for the lowest percentage as possible.
It Is Possible To Find A Good High Risk Payment Processor
Regardless of the overwhelming odds of finding a trustworthy high risk merchant account provider, it is not an impossibility. There are plenty of high risk merchants who are satisfied with their current partnerships with professional, highly knowledgeable, high risk merchant account providers. By using the tips above, you will be well on your way to finding your perfect fit.