If you’re in the business of offering extended warranties on automotive services, finding an effective merchant account solution can be difficult. Extended warranty merchant accounts for automotive business are hard to come by because it’s usually classified as a ‘high risk’ business, then kind most banks and traditional merchant account providers won’t go near. This is due to the unpredictability of when expenses may be incurred.
Extended warranty businesses have a lot in common with insurance companies. In some cases, customers may even choose to use an extended warranty as an alternative to insurance. As a warranty provider, a business essentially promises to fulfill warranty obligations after the manufacturer’s own warranty runs out. One reason this can be a risky business is that manufacturers’ warranties are often carefully tested so that they cover a period of time in which few malfunctions are likely to occur – in other words, an extended warranty provider actually has a higher risk of having to cover problems than the original manufacturer, because by the time and extended warranty provider’s responsibility kicks in the warranted product has already had a lot of use.
As a result, extended warranty companies need to manage cashflow very carefully and have accurate estimates of how much cash they will need to spend fulfilling warranties each year. A miscalculation or a sudden influx in warranties that need to be fulfilled can leave a company in a cashflow pinch that can sink the business.
While most warranty companies are able to protect against problems the same way insurance companies do – by setting their eligibility criteria and premiums at the right level – there is still a large element of risk in the business. This is particularly true for new companies who are yet to establish a good credit history and who may still be working out a few of their business processes, budgets and so on. For a new start up in the extended warranty industry, getting a merchant account can seem virtually impossible.
So these are some of the reasons traditional merchant account providers are not big fans of extended warranty companies – but that doesn’t mean you have to give up hope on having your own merchant account. In fact, if you know where to look, getting a merchant account is easier than you might have imagined.
eMerchantBroker is a merchant account brokering service which can help you find the best high risk merchant account provider to suit your specific needs.
A merchant account makes running an extended warranty business much simpler and cheaper. You can cut down significantly on transaction fees and start taking payments by a wider variety of methods. High transaction fees can be a significant cost on a growing business and can even prevent you from growing to the levels you want to achieve. eMerchantBroker can help remove those growth frustrations by setting you up with a cost-effective high risk merchant account provider, so you can increase volumes while keeping transaction costs to a minimum.