Introduction
The merchant account underwriting process can be overwhelming, especially for high risk merchant accounts and those who have been declined by traditional banks and aggregate payment processors. Due to a few untrustworthy companies, banks and payment processors often see high risk merchant accounts as something to avoid altogether.
In-House Pre-Underwriting For High Risk Merchant Accounts
Some payment processors, like PayKings, offer in-house pre-underwriting for high risk merchant accounts. This process is designed to cater to the unique needs of high risk businesses.
Types of High Risk Businesses
- Loans payday lenders
- CBD retailers
- Other businesses with reputational risk
Different providers have different standards for high risk merchant accounts. It's best to ask upfront about the types of businesses a provider avoids or views unfavorably.
The Ideal High Risk Merchant Account Application
While there's no perfect candidate, certain elements can speed up the application process:
- Solid history of direct communication with customer base
- Minimal chargeback ratio (ideally under 1%, some may accept up to 1.5%)
- Meeting minimum processing thresholds (e.g., $50,000 for some providers)
Red Flags in the Underwriting Process
Factors that may cause concern or raise red flags include:
Bad reputation in transactions (e.g., poor ratings from Better Business Bureau or Consumer Financial Protection Bureau)
History of litigation or negative press
Consistently high or increasing chargeback ratio
Frequently changing processors
Bad credit or low credit score
Other merchant accounts on a bank statement
Financial instability
Sharing an account with another merchant
What to Expect When Applying for a High Risk Merchant Account
After submitting documents, applicants may face additional steps:
- Requests for clarification or additional documents
- Potential interview with underwriters
These additional steps are normal and not necessarily a bad sign. Underwriters are trying to understand your business needs and payment history to approve your high risk merchant account.
Preparing for the Application Process
To navigate the potentially confusing underwriting process:
Gather relevant information and resources beforehand
Be prepared to provide detailed information about your business
Be transparent about any potential issues in your business history
Choose a payment processor with experience in high risk merchant accounts
Conclusion
While the process of obtaining a high risk merchant account can be challenging, working with a payment processor experienced in high risk industries can make the process smoother. These providers have the expertise to help your business succeed in the long term by setting up your high risk merchant account and enabling you to accept online payments.