The Value of Merchant Accounts
Every e-commerce business owner knows the importance of securing a merchant account for their business to take off. Depending on the needs of your company, a merchant account offers flexible international and local payment options for your customers so that they can smoothly do business with you. Having a merchant account also makes your business scalable and open to different income opportunities. Finally, it offers a secure place for holding all customer transactions. Applying for a merchant account though is not necessarily a walk in the park. Providing business formation documents, proof of liquidity, income and transaction statements is just half the battle. Convincing them that your company is sustainable and profitable in the long term is a crucial part. Not every application makes the cut, unfortunately.
Five Reasons Why Your Application May Be Declined
One of the best ways to ensure success is to learn from the mistakes of others. Here we have compiled five common reasons why your merchant account application may be declined:
1. You lack the proper documents. It is critical to give your bank the most accurate summary of your business with company documents, bank statements, chargeback rates, and sales volumes. If you are not a financial expert, you could get really confused and end up submitting incomplete documents.
2. Your description of your business does not add up. Since you are describing your business to strangers, it is important that your numbers add up to the products you are selling and the type of business you are running. For example, if your average ticket size is $10,000 and your monthly sales volume is $300,000, it may raise some eyebrows.
Also, if you are looking for a million dollars a month in processing volume for a part-time, start-up business, they might see it as a warning sign.
3. You have poor personal credit. Since a merchant account is similar to a credit line, a healthy credit score is golden. They want to know that your company is in it for the long term and having a long history of unpaid debt or failed business ventures just might scare them away.
4. Your business has a bad public reputation. Although complaining customers are inevitable, having more bad than good reviews might hurt your application. Luckily, there are customer experience strategies you can use such as having a dedicated channel for answering customer queries and concerns and encouraging customers to use that channel. Prevention is better than cure.
5. Your business is high-risk. This is a common reason for declining an application. The truth is, some industries are considered high risk just because of the nature of their products such as subscription packages, software solutions, and nutraceuticals, to mention some. Such industries are tagged as high risk because of difficult product tracking and high chargeback ratios. High chargeback ratios are avoided by most banks for two reasons.
It might hurt their finances if there are too many chargeback dues and the business decides to close and it might also hurt their reputation with credit card companies and other banks.
Expert Account Handling and Risk Management
Thinking about all these risks and regularly reviewing your financial records can take precious time away from building your business and finding quality products that sell. That’s where Merchant Account Managers come in. We are with you from securing everything you need to get that merchant account approved to help you create a plan to mitigate chargebacks risks. Our 15 years of experience with e-commerce merchants with unique business models will be invaluable when we give you advice on how to create that successful application. We know what banks look for and what questions need to be answered. Even after it gets approved, we will help you mitigate risks so that your account stays healthy. We will give you sound business advice on emerging trends for your business model, provide best practices on customer service to manage your chargeback ratios, and regularly review your financial health. We are all about creating and maintaining a good relationship with your merchant account provider, giving you the opportunity to get the best rates and terms possible. Let us help you with the details so you can focus on the bottom line.