Opening A Merchant Account When You Are A High-Risk Business

Apr 22, 2022

High-risk businesses have more complex issues to contend with than low-risk businesses. For one thing, high-risk businesses will have great difficulty opening up a traditional merchant account. Most banks and processors will not work with high-risk businesses since they are known for experiencing the highest potential for fraud and chargebacks. 

What Characteristics Make A Business High-Risk?

Depending on the bank, payment processor, or payment service provider, each provider will have its own guidelines and standards. These standards are what determine which businesses are considered risky. When a high-risk merchant applies for a merchant account, they will be required to submit an application where the specifics of the business will need to be described. 

Typically, the following characteristics seem to be the standard to identify a business as high-risk:

  • High sales volumes
  • International sales
  • Accepting subscription-style payments
  • High average transaction sizes
  • Highly regulated industries.
  • Little to no business experience
  • A large number of card-not-present transactions or (CNP)
  • New or poor credit scores.
  • Past fraud or illegal activity.

What Are The Best Practices For Landing A High-Risk Merchant Account?

Being a high-risk merchant alone, will not qualify you for a high-risk merchant account. Consider taking these critical steps to demonstrate to your future provider that you are capable of having a long-term business partnership with your provider. Here are just a few:

  • Analyze your cash levels – Having easy access to cash spells stability. What banks like to see is that you have between 25% to 50% of your monthly card transaction volume in your bank account.
  • Be honest – It is critical to be open and transparent, especially in the beginning, during your application process. By hiding information, you could really hurt your business and risk being shut down. 
  • Have the right documents – Have three to six months of bank statements ready to show during the application process. They should clearly depict where the money has come from and where it was going.
  • Talk to your customers – Not all chargebacks are ill-intended. Some could be that customers were really unhappy with the product or service. If that is the case, take the time to reach out to your customers directly and see if the issue can be resolved as soon as possible.
  •  Be a learner – Always rely on the expertise of your payment processor. They know the ins and outs of the industry and are looking out for the best of your business. Allow them to help you set up your payment process and implement their recommendations.

How Payment Processors Come To A Decision

The way it works is that business owners do not directly apply for a merchant account. Instead, a payment processor must be found first to partner with. The payment processor, in turn, looks for a banking partner where a merchant account can be opened. 

In the end, it is the bank’s decision whether or not a business will be approved for a merchant account. They are the ones who write the underwriting policies. 

One thing to know is that simply applying for a high-risk merchant account does not guarantee approval. Some businesses may have too many factors of risk, despite the provider specializing in risky industries. 

Once a banking partner has been discovered, the merchant account can be set up, and the business can now begin accepting and processing credit card payments, 

Find The Best High-Risk Merchant Account Provider For Your Business

High-risk merchant account providers are in the business to help you process your payments seamlessly and securely. So where should you start your search for reputable high-risk merchant account providers? 

Start by looking into “established industry channels” such as websites, direct marketing, or trade magazines. Once you have found a few, consider setting up an appointment to meet in person.

Let us help you get a high risk merchant account today!

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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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