These days, many people prefer the convenience of buying by credit card. In the United
States, nearly one in three consumer purchases are paid for on credit. It is therefore crucial
for businesses to easily accept payments on credit to avoid losing sales.
No matter what type of transaction you are handling, whether it is a small store, an online
store or a mail order business, having a credit card service for customers will certainly be
useful for the growth of your business. However, one cannot simply accept credit card
payments in an instant. Indeed, you have to ask several banks for merchant status to be able
to do so. But once your merchant status is established, your business will be ready to go.
How does merchant status work?
Your business must first partner with one or a few banks to be able to accept payments on
credit. Before that, you need to apply to these banks for merchant status. These banks will
work with you to transfer money paid by credit from customers within a day or two of the
sale. They will also be responsible for collecting the money from the customer, and in
return, your company will pay them a usual commission, ranging from 1.5% to 5% for each
transaction. Other fees may include monthly support and equipment rental.
What do banks look for in companies applying for merchant status?
Applying for trader status can be a very similar process to applying for a loan, as lenders
would certainly investigate your overall financial situation. The ability to have credit
payments utilized through your business will certainly be sought after. Here are some
factors lenders will need to consider before granting you merchant status:
• Type and duration of your business.
Lenders would certainly need to know if granting status to your business might pose higher
risks to accepting payment on credit. For example, home-based businesses may have more
difficulty obtaining merchant status than businesses with stores. Other than that, businesses
that have already been established for a while, unlike those that are just getting started, can
gain status faster.
• Your sales history.
Lenders would also be interested in knowing if your business could really bring money to
the table. If your business has a reliable sales track record, it will be easier for you to achieve status.
• Your credit history.
General solvency would certainly be considered very carefully. Prepare to have your
personal or business credit history investigated. With this in mind, lenders may also try to
verify your business performance with your previous merchant accounts, as this gives
information about your creditworthiness.
What do you need to do to get merchant status?
To prepare your business for application, you must be prepared to have all of your business
information as well as your personal credit history at your fingertips. This includes how
you get the necessary finances for your business and how you manage things in the
business. Asking for a credit report for your business beforehand will also be a good thing.
Most importantly, make sure you've maintained a favorable professional and personal credit
rating so lenders consider you faster. Pay your dues on time and avoid accumulating huge
debts.
In your small business, opening a merchant account may seem unnecessary or too
complicated at first, however, once you start accepting credit payments in your business,
you will surely realize how much it can help improve your company.
Not only does it boost sales, but it can also provide much more convenience for your
customers and even establish your business. More importantly, accepting credit card
payments will surely improve cash flow.
Ultimately, once you see how your small business can grow by having Certified Merchant
status, you'll realize how worth all your hard work.