You got rejected for a merchant account. Now what?

You got rejected for a merchant account. Now what?

Have you been turned down by a merchant account processor? Accepting credit cards can be critical to the success and growth of your business, so when your application has been rejected, you want to do everything possible to ensure that you get approved the next time you apply.

Here are some suggestions for improving your chances.

1. Find the right merchant processor for your particular business
All merchant processors have their own criteria for accepting customers, but there are some general reasons that they might turn down an account, according to Jared Ronski, principal at MerchACT, a company that specializes in helping Internet merchants get merchant accounts.

"The issue that we're often seeing is that a merchant is in a higher-risk business," he says.

High-risk businesses can include those with specific issues, such as recurring chargebacks or a subscription-based business model, or companies in certain industries, including travel, dating services, adult entertainment, telemarketing or auctions.

If you're an Internet-based business, Ronski says that doesn't necessarily put you in a high-risk category.

"E-commerce is expanding exponentially," he says. "Because it's a card-not-present transaction -- no swipe or PIN entered at a terminal -- there is a slightly higher risk for the bank, but now that it's gone mainstream, it's not necessarily harder to get a merchant account."

If your business has poor credit, however, that's likely to put your company into the higher risk category.

"People who have had credit issues in the past will in most cases get declined unless they have good company financials to back them up," Ronski says.

The best thing for high-risk businesses to do is look for niche merchant processors who understand their industry and have an underwriting team in place that's prepared to provide ongoing risk management, Ronski advises.

"Some smaller, more unique processors have more account management services, so instead of having a number to call where you speak to any individual who picks up the phone, you have a dedicated account manager who understands your exact business and who has been with you since the beginning," he says. "That will be much more helpful going forward if something does happen. Instead of them terminating the account, they're more likely to say 'Let's look at what the issue is and how can we resolve it.' "

2. Improve your presentation
A detailed presentation of your business to a merchant processor can improve your chances of getting approval. That means assembling your financial statements and tax returns and being as forthcoming as possible on your application.

"Instead of filling in information with one-word answers, you want to be as descriptive as possible," Ronski says. "Even include a separate executive summary that outlines the business, outlines who the principals are and their experience. You want to put together a strong case for the underwriter that will result in them understanding the business a lot better and make them more likely to issue an approval."

If you've had previous problems with merchant accounts, you may need to take additional action. Businesses that have been terminated by a merchant processor in the past end up on a black list -- called the match list or terminated merchant file (TMF) -- which banks and processors check when a business applies for an account. Processors usually decline businesses that appear on that list.

If you've been terminated by a processor in the past, try to get your name removed from the TMF if you can; otherwise, it remains there indefinitely.

"The problem is, the only one who can take you off the list is the company that put you on that list, and this may be a relationship that you haven't had in years. It's tough to go back to them," Ronski said.

Nevertheless, he has seen many instances in which merchants have been able to explain to the processors how they have fixed their problems and convinced those processors to take their names off the match list.

3. Get help from specialists
If you've been turned down by several processors, you may want to seek advice from a company specializing in helping high-risk businesses get merchant accounts. Look for a company that reviews your business model and your presentation package from the viewpoint of processors underwriters, and then helps you make changes to make you more attractive to them.

Even merchants with a combination of problems -- bad credit, high-risk business, no financial data and a place on the TMF list -- can get some type of merchant processing.

"There are always strategies to deal with this type of situation, whether that's going with an international account or opening up an additional corporation," Ronski says.

However, merchants who have to use these more specialized processors will end up paying a premium at first, but that doesn't mean that they'll have to pay those higher costs forever.

"After a certain amount of history -- six months to a year, depending on who you're working with -- if everything looks good you can go back and say, 'We've been with you for a while, what can you do in terms of rates?' " Ronski says.

If your processor isn't willing to work with you, you can take your good financial statements and good history and apply to another merchant processor -- and this time, you'll have a better chance of winning approval.

See related: How to decode your merchant account rate, 5 tips for fielding merchant services sales pitches

Published: April 25,2023