How Small High Risk Businesses Can Get a Merchant Account

This is a subject we’ve scrupulously avoided over the years, never quite ready to to face it directly, and for good reason — it’s one of the most difficult issues we’ve had to deal with. Let’s be clear — if you are operating, or considering doing it, a business in a very high-risk end of the spectrum, you will be having a big difficulty finding and keeping a merchant account, on any terms. This is just the way high risk processing works and, if recent regulatory history is any indication, it is not going to be getting much easier anytime soon.

As is usually the case, in high risk size does make a huge difference — there will always be a processor willing and able to process for a million-dollar-a-month gaming site, even if its processing history isn’t quite as good as one might wish, whereas a thirty-thousand-dollar-a-month weight loss website may not even receive a quick look by an underwriter. And of course, newly-established high risk businesses are treated even less generously.

So, the question is what do you do if you find yourself in such a situation? Well, to begin with, you should arm yourself with a great deal of patience and be ready to be rejected time and time again. Eventually, if you do all the right things, you will find a process willing and able to give you a chance. But let’s take a closer look at what you should expect to be dealing with.

A Matter of Size

There isn’t a firmly defined limit, but most payment processors I know of would consider a $100,000 in monthly credit card volume to be the dividing line between high risk businesses worth dealing with and those that are not. Of course, exceptions will always be made, for instance for businesses that are not quite over the threshold, but are close enough to reaching it and are displaying a solid growth potential. Still, the volume, whatever it is, is a crucial factor with every processor and there is not getting around it.

Now, an argument can be made that the payment processors would do themselves a big favor if they relaxed the volume requirement a bit. After all, we charge high risk merchants a high premium, so we could make a decent profit even from working with, say, a twenty-thousand-dollar-a-month business. Furthermore, we could charge that merchant an even higher rate than we would charge one with, say, three times the volume. So why aren’t we doing it?

Well, the fact is that even a relatively small merchant could do a lot of damage if things went wrong, as they often do in the high risk payment world. Yes, the risk exposure on our books would certainly be lower than it would be with a larger business, but, in addition to the monetary losses, a blow-up could damage our good standing with the credit card networks and hurt our relationships with our acquiring banks. Do that a few more times and the damage may become irreparable.

On the other hand, bigger merchants tend to have been around for longer and so have had more time to improve their risk management process and have left a much longer paper trail for us to examine. Furthermore, the longer processing history has allowed them to develop and improve their processes for dealing with chargebacks, which is the biggest issue that plagues merchants with shorter histories. So working with bigger merchants has advantages that extend beyond those related to their size.

So What Is a Smaller Merchant to Do?

Now that we’ve established exactly why your smaller size is a disadvantage when it comes to finding a credit card processing solution, the question becomes whether or not you can do anything about it and if so, what. Well, while this will always be an uphill struggle, there are certain things that can help make the climb a less steep one.

To start with, make sure that all of your documentation is in order. Begin with your incorporation paperwork, bank accounts, financial statements, profit and loss statements, tax returns, office utility bills — all of these should be in good shape. Writing a business and marketing plans, if you haven’t done so already, wouldn’t be a bad idea. Then make sure you have all of the business licenses and permits that may be required in your jurisdiction.

This would be a good start, but it is not going to be enough, not by itself. If your business is well-capitalized, that may be enough to tip the scales in your favor, as the acquirer will be reassured to see that you can fund your operations and actually have something to lose, should things go wrong. But what do you do if you don’t have money in the bank? Well, having a good processing history with another business may just do the trick. In fact, we’ve recently had such a merchant approved — after all, we’ve had a long relationship with them and felt quite confident that they would be able to manage their new merchant account with the business they were just starting as well as they have been doing with the old one.

But what about if you don’t have money in the bank and don’t have any previous credit card processing history in the high risk world? Well, this is where you have to get creative. Even more importantly, you have to be able to find the right service providers. You may just be able to get a high risk merchant account with a processor which usually would never give you one — it is not quite clear how that works, but we’ve seen it often enough to know that it is not a one-off event. However, the thing about these merchant accounts is that they don’t typically last — once the service provider realizes that they’ve been careless in their underwriting process, the account gets shut down. However, that may just give you a few months of precious processing history, which may then help push you over the hump when you proceed to apply with another processor.

Having low processing volumes is a big disadvantage in the high risk credit card processing world — that much is beyond doubt — and there isn’t much you can do about it, especially when you are just starting out your business. So the best thing you can and should do to improve your chances is to make certain that you look as good to your prospective acquirer as you can make it. You may still need some luck to get the high risk merchant account you need, but you would have substantially improved your chances.

What Our Customers Are Saying

Read more reviews here.