What to Expect From the Merchant Account Underwriting Process

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.