This is typically not a problem. Merchants who have less than stellar credit can still be approved for accounts, but they won’t receive privileges such as next day funding. Additionally, they must wait forty eight hours before they can receive their funds. Merchants that wish to accept credit card payments from their customers must have a merchant account. Each processor will require you to meet certain criteria before they will open an account for you, with the first being a credit check. Most processors are willing to work with merchants that have poor credit, so you have a lot of options.
Your Business Structure
The way your business is structured will determine the type of credit check the processor performs. For instance, if you operate your business as a Limited Liability Company, many processors will assess your business credit as opposed to your personal credit. If you’re the owner of a corporation, processors may assess your credit in order to confirm your identity. Some processors will require an employer identification number, so if you don’t have one you may need to contact the IRS.
The Discount Rate
The credit you have will decide the discount rate you’ll have to pay for handling credit card transactions. Whenever a customer swipes their card in your store, a fee called the discount rate will be given to the business. When the discount rate is lower, this means that the business gets to keep more cash for every transaction. Merchants who have less than stellar credit will often have to pay higher discount rates. If your credit score is lower than 619, this typically means that your credit is bad. Merchants with poor credit should shop for payment processor thoroughly, so they can get the lowest rate possible.
It is crucial for merchants with bad credit to build good relationships with their processor. The reason for this is because when you prove to be trustworthy and reliable, the rates may be favorably adjusted. However, the discount rate is only one of the fees that should be considered. Other rates include charges for the equipment, application fees and charges for voice verification.
Ask Around & Get Recommendations
Bank managers will often be able to recommend quality merchant account providers. Merchants who have business accounts may be given merchant accounts irrespective of their credit score. Financial institutions will often overlook undesirable credit when their customers maintain positive accounts with them. Additionally, the startup costs for your merchant account can also be reduced.
Most processors are not thrilled with merchants who have had bankruptcies in the past, and may decline to open accounts for them. When someone goes bankrupt, it will remain on their credit report for up to a decade. However, this should not discourage merchants who have past bankruptcies, as there are processors who will work with you. Of course, your discount rate will be set much higher than usual. Merchants that operate in high risk industries will also be heavily scrutinized by processors, and they can expect to pay higher fees as well.
If you need help with setting up a merchant account but have bad credit, feel free to talk to us at Nationwide Merchant Solutions as we often facilitate such cases.