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If you’re like most business owners, the decision to apply for a new merchant account was probably a big one for you and with good reason. With a merchant account in your corner, you’ll finally be able to offer your customers the same convenient payment options your competition can. It’s definitely a smart move that will allow you to grow your business in new and exciting ways going forward.

Even so, the application process can be a bit intimidating. Denials certainly aren’t unheard of, so it’s understandable if you’re anxious about the possibility yourself. Here we’ll go over some of the more common reasons a given business might be denied a merchant account. We’ll discuss how you can better prepare to navigate those obstacles as well.

1. Your credit history wasn’t up to snuff.

Applying for a merchant account is a lot like applying for a loan, a credit card, or even housing in that the state of your credit can make or break you as far as whether or not you’re approved. A standard check will be run on the person (or people) signing for the account, so keep that in mind when deciding how to apply. Active collection accounts or other black marks on a credit history will definitely hurt your chances.

If you plan on granting multiple people the ability to sign on behalf of your business, take a moment to consider each person’s credit history first, as choosing the folks with the best credit will help lower your likelihood of rejection. Also pay close attention to the criteria any signers need to meet in regards to your merchant processor of choice. In most cases, they’ll need to be part-owners, officers, or – in the case of a corporation or LLC – the holder of a high title.

2. You have active tax liens.

Lots of situations could constitute a high-risk application, but a tax lien is probably one of the most serious. It doesn’t have to be a business lien either. A personal lien in regards to you or any of your other signers would be just as sobering for sure. Either type almost always stops the application process in its tracks immediately.

Liens suggest that an applicant can’t always be trusted to honor their debts or take care of their responsibilities. If there’s an active one against you (or there’s been one in the recent past), make absolutely certain it’s been fully resolved before you apply for a merchant account.

3. The type of business you’re in is prohibited.

Even if you have excellent credit and are shown to be an upstanding tax payer in every way, you may still have trouble getting approved for an account if your business is part of a high-risk industry. The exact list of prohibited businesses varies from one merchant processor to another, but common examples include telemarketing, timeshares, gambling websites, weight loss, adult retail, and multi-level marketing. Ecommerce sites that specialize in selling high-end products or online subscriptions are frequently considered risky as well.

If you are part of one of those industries and have been having issues getting approved, consider expanding your options. Many merchant processors actually specialize in high-risk credit card processing accounts. Others may be willing to take you on, but will also charge higher processing fees to help compensate for that risk.

4. Your processing volumes don’t gel with your business type.

When you apply for a new merchant account, you’ll need to provide information not only about your past volume processing, but your expected business growth into the future as well. This gives the merchant processor a good idea what to expect from you as far as overall credit processing amounts. However, it’s important to understand that your numbers will be compared to going industry norms. If you fall outside of these norms, it could be viewed as problematic.

When evaluating the processing amounts for your business, make sure you’re basing your numbers off of recent volumes. Expected growth data should cover a period of the next 4-6 months, as that’s a great way to land on a number that’s equal parts optimistic and realistic.

5. Your processing volume doesn’t match your average ticket size either.

You’ll want to make sure your processing volume makes sense as compared to your average ticket size as well. A high average ticket in comparison to a relatively low processing volume is definitely a problem you can be sure will raise red flags. In some cases, you might be given an opportunity to explain the discrepancy, but some banks might simply decline your application automatically.

Make sure you’re 100% honest and up front not only as far as what you’re really selling, but how much you’re charging your customers for it. Don’t attempt to hide anything. At the end of the day, the entire process will be easier on everyone if you’re just up front right from the get-go.

6. You’re included on the MATCH list.

The merchant processing industry actually has a “blacklist” called the TMF (terminated merchant file) or MATCH list. If you’re on it, it indicates that another bank or processing company has terminated a previous merchant account with you and decided to flag you as a potential credit risk. You remain in the system as being on the list for a total of five years.

You can ensure this won’t be an issue for you by double-checking that any past accounts opened in your name were left in good standing. If there are any outstanding fees or debts owed to another processor, make sure you pay those or otherwise have them resolved before you apply for a new account. Some processors will give you a break if it looks like you’re actively making an effort to get off the list.

You’ll also want to be aware of other possible reasons a given merchant’s name could wind up on the MATCH list and take steps to avoid them. Do you respond promptly to customer requests and go out of your way to resolve issues quickly? Do you make it easy and convenient for customers to contact you if they need to? Do you take care to process within normal requested volumes?

7. Your business has been linked to fraud.

Every so often, a given merchant account will be denied because of links to possible illegal activity or fraud. It might not just be the business itself either. It could be one or more of the products you’re selling, so keep that in mind during the application process.

If products for sale on your website don’t match up with the amounts you’re selling them for, it’s a problem. The same thing goes for product descriptions that don’t accurately and clearly describe the product. It should also go without saying that clear attempts to sell anything illegally will get you denied pretty much every time. Think controlled drugs or illegal adult content like child pornography!

8. There are issues with your business license.

Most merchant processors will require you to have a proper business license in place before you can be considered for an account, so you’ll definitely want to make sure you have yours squared away before you start the application process. It’s the best way to prove your business has been found to meet all the necessary government and legal criteria.

Some business types and organizations may need to meet stricter, more exacting requirements before they can be granted a license. For instance, online gambling sites and pharmacies may need to adhere to limitations on what they sell and/or where they can operate. You may also be required to obtain special federal permits before you’ll be granted a license to sell goods like firearms or alcohol.

9. Your company sees an excessive amount of chargebacks.

A merchant account provider that’s willing to take on high-risk accounts may give businesses a break if they’re in certain industries. For example, companies that offer automated recurring billing options or sell memberships deal with a longer period of time during which they’re susceptible to chargebacks. However, there’s still going to be a point at which the overall number of chargebacks will be considered unacceptable.

That said, make sure your business is already doing everything it can to prevent possible or future chargebacks. Return, refund, or cancellation policies need to be crystal clear and customers need to be kept in the loop regarding transaction status at all times. All transactions should be carefully logged and receipts deposited quickly. When possible, you should ship or release any merchandise to the customer before a transaction is deposited as well.

All in all, the key to getting approved for a new merchant account is to make absolutely sure to cover all your bases. Always follow the rules and regulations set forth by the government, the law, and so forth. Treat your customers fairly and cordially. Be honest and forthright as far as how you do business as well. You’ll be the proud owner of a merchant account in no time!

About Mobius Pay
MobiusPay specializes in high-risk merchant activation, domestic and international processing. MobiusPay helps online businesses with payment processing, high risk merchant accounts, chargeback & fraud prevention, online check ACH processing and with maintaining PCI compliance. Please visit https://mobiuspay.com/ to learn more.

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