The credit processing system can be confusing for new merchants that are attempting to open merchant accounts. Reality is that if your business is in an industry tabbed as ‘high risk’ by the traditional banking systems opening a merchant account can be difficult. Unforeseen hurdles will spring up and there will be disadvantages affecting your business.
The ‘High Risk’ Stigma
Fair or not, there is a stigma attached to ‘high risk’ businesses. It will be significantly more difficult to find credit processors willing to open a merchant account for your business. The available alternative is to seek high risk processors. High risk processors have experience handling businesses in similar fields as yours. Yet, if you choose for this route you need to check the background of your processor. High risk processing is notorious for unethical service providers that can hit you hard in the small print of your agreement.
Why are you ‘High Risk’?
There are some common characteristics of a business that will land it a high risk tag. The first and most obvious is if you’re an offshore business. If you’re operating from outside the United States you’ll be all-but automatically considered high risk.
The second reason for banks to call you high risk is if you operate in an industry with a legal grey zone. For example, marijuana dispensaries are notorious for differing legal standing based on state law or federal law. This will cause most banks to opt for a conservative approach by declining your application to protect them from legal consequences.
A third reason you are high risk is if you use what the bank considers questionable sales and marketing tactics. If your business plan lands in a hazy area with regard to your marketing tactics the banks will again choose to protect themselves from any legal ramifications.
Finally, a poor credit history can doom your business even though it’s your bad credit not the business’ bad credit. High chargeback ratios, delinquent payments, and a bad credit score will land you on the high risk list fast.
What ‘High Risk’ Means for Business
Time to face the music. High risk means your credit processing will come with higher rates, worse terms, and the frustration of banks declining you. This is a cold hard reality. The best path available for your business is to find a high risk processing provider that is reputable like eMerchantBroker. They can provide you with the best opportunity for opening a merchant account on the best terms possible. eMerchantBroker has a team that’s been at this for years and can find you the best credit processor for your business.