Have a business and can’t get a merchant account due to bad credit? You’re not alone. An estimated 34 percent of Americans have poor or fair credit. Thankfully, there are merchant solutions available for your business.
Every business owner knows the importance of being able to process credit cards. These days, it is practically a necessity. However, many business owners don’t realize they will need a special account to be able to accept credit cards from their customers.
For business owners with bad credit, finding merchant services for small businesses can be difficult, but it is not impossible.
The Causes of Bad Business Credit
There are many things that can lead business owners to have lousy credit themselves or for their business to have bad credit or be considered high risk.
A business may have bad credit if the owner has filed bankruptcy in the past or have maxed out their line of credit on their loans or credit cards. Most merchants consider a score of 619 or lower to be “bad.”
Just as bad as having bad credit is being considered a high-risk business. Being high-risk can also make getting a merchant account difficult. High-risk businesses may include businesses that:
- Are new.
- Sell risky products, like CBD.
- Have clients who are at risk of defaulting on payments (bankruptcy lawyers, for example).
Whether your personal credit is poor or you are a high-risk business, finding a merchant account is possible — it may take some work to get one.
How to Get a Merchant Account with Bad Credit
To get bad credit merchant processing, businesses can:
- Apply for a merchant account. This may involve the provider pulling your merchant credit report before approving you.
- Find a company that specializes in bad credit merchant processing and see if they will approve your company’s account.
- Consider using overseas merchants, who typically don’t pull credit reports but may have high startup fees.
- Check with your local bank. Some banks offer merchant processing if your other accounts are in good standing.
There is no easiest merchant account option when it comes to finding a processor when you have bad credit. Instead, choose the option that works best for you.
What You Need to Know Before Applying
When searching for a merchant account with bad credit, you’ll need to be prepared to make some concessions.
Before applying for a quick merchant account, review the consumer rating for the company you are considering and compare different ones to see what types of businesses they work with.
You will also want to know what type of business you are. Depending on your business, the merchant may check your personal credit or business credit. Feel free to ask if you aren’t sure which credit the merchant will pull for your application.
Be prepared to provide documentation should they ask. Some may request documentation for things on your file.
Be Aware of These 3 Things When Getting a Merchant Account with Bad Credit
When getting a quick merchant account with bad credit on your record, there are some things you should know about.
First, the merchant may set higher processing fees for your business. These fees can often be negotiated down the longer you work with a merchant — as long as you keep your account in good standing during this time.
Second, the merchant may require your business to sign a long-term contract or at one that is longer than most of their clients have.
Finally, the processing merchant may require you to have a reserve fund. This fund is established by the merchant taking a portion of the funds that are run through the account and setting it aside to offer protection for them should something happen. Again, this could be negotiated down the longer you work with a merchant processor.
Finding a Merchant Processor with Bad Credit
Bad credit in your personal life can impact your business. And having bad credit at all can make it challenging to find merchant services for small businesses. However, it is possible.
Start by exploring the different options out there. Before applying, research the company to make sure you work with one that meets your business’s needs.
If approved, keep in mind that you may be charged higher processing fees or need to have a reserve fund in place. Still, these stipulations may not need to be in place forever.
Sources:
https://www.creditcardprocessing.com/resource/article/getting-a-merchant-account-with-poor-credit/
https://instabill.com/bad-credit-merchant-accounts/
https://smallbusiness.chron.com/build-corporate-credit-personal-credit-bad-14848.html
