If you’re eager to start processing credit card transactions for your business, you’ll need a merchant account. It's essentially a line of credit that enables a business to process credit and debit card transactions.
There are two types of providers that equip you with a merchant account. Payment Facilitators — think Stripe, Square and PayPal — offer their customers one shared merchant account. The benefits include fast setup and no merchant underwriting, which some fledgling businesses can’t successfully complete. The downsides include less support, expensive Flat rate pricing and a risk of held funds from your bank account.
A Merchant Account Provider, also known as an Independent Sales Organization (ISO), individually underwrites each one of its customers. This results in a more boutique experience with dedicated support, more affordable rate plan options and a lower risk of held funds.
This post will focus on how to set up a merchant account with a Merchant Account Provider. If your business is more mature and you’re looking to process high credit card volume, you can’t afford to pay Flat rate pricing. These are the steps you’ll need to take to partner with a provider that can give you Interchange-plus pricing along with dedicated support.
4 Steps to Merchant Account Setup
Before diving into the documentation needed, it’s important to highlight that not all providers are created equal. Merchant statements are confusing and unnecessarily complicated, which makes it all too easy for providers to use unethical billing practices with their customers. These include numerous fake fees and markups.
Save yourself precious time by seeking a provider rooted in ethics and transparency that boasts the newest payment technology. Researching and switching providers isn’t easy, which is why starting off with a trusted provider is the best first step to processing credit card payments for your business.
Once you settle on a partner, you might be asked to complete a number of tasks to get underwritten and up and running. Here’s what that process typically looks like.
The Application Process
Most providers have an application that’s required for setup. You’ll be asked to provide the following information:
- Basic business information: This includes address, D.B.A. name, website, phone number and card types you’d like to process (Amex, Discover, MasterCard and Visa).
- Processing volume estimates: These estimates might include expected average and maximum transaction amounts, and maximum monthly processing volume.
- History and policy information: This might include questions about your refund policy, any previous account termination or bankruptcy, current PCI compliance, and other information to gauge your financial standing.
Why are these details important? As we said from the start, a merchant account is basically a line of credit. If a large transaction turns out to be fraudulent, your provider will front the funds needed to cover the chargeback if your business cannot afford to do so. This requires all providers to carefully vet their customers to ensure that they do not take on a business that poses undue risk.
You can inquire about an application via your chosen provider's’ website or a telephone call.
Submit a Voided Check
Funds are deposited into your business's bank account when you batch out (usually on a daily basis). This transfer takes one to two business days, depending on your batch-out time and provider’s setup.
Your provider will need a voided check to set up the direct deposit between the merchant account and your bank account.
Supply Current Merchant Statements or Proof of Legitimacy
If you already process credit cards for your business, it’s best to provide two recent months of merchant statements. This helps providers correctly assess the risk of your account and verify the high transaction amount and monthly processing limits you requested. Different volume expectations alter a business’s risk and potential chargeback amounts.
Furthermore, if you partner with a provider that is focused on saving you money and eliminating unethical billing practices from your statements, this is the only way to identify cost savings. At PayJunction, we work to get our customers better technology at a lower price, so we predominantly require current merchant statements to uncover any unethical billing practices and ensure that we accurately calculate the savings you will receive by switching to us.
If you do not already process credit cards for your business, we request a few items to prove that you are a legitimate business. If your business is over two years old, your website will suffice to determine legitimacy. If your business is under two years old, we request two photographs of your business: one of the exterior and one of the interior.
This helps us see the establishment where you’ll be conducting business. Because of the USA Patriot Act, a copy of your business location’s lease or deed may be requested to ensure that you are conducting business at the disclosed location.
Provide Additional Financial Documents
If you request higher processing limits, you may also be asked to provide bank statements, income statements and balance sheets. The definition of “higher processing limits” varies by business type but could be over $50,000 monthly plus a high transaction limit over $5,000, for instance.
As stated previously, these limits greatly impact the risk of underwriting your account. These additional bank documents mitigate this risk by showing providers your financial standing and likelihood of defaulting on a large, disputed transaction.
It might sound like a lot of paperwork to share, but the time spent is well worth it. A Merchant Account Provider is a direct partner that has a vested interest in your business’s success. Partner with one that can offer you affordable rate plans, U.S.-based phone and email support, and timely access to your funds.
Read reviews online and try to determine the culture and ethos of any financial provider before you begin the application process. Your provider will have its hand in your business’s success, so make sure it’s one that has your best interests at heart.
Obtain a merchant account.Submit Your Statements
Do you already have a merchant account for your business? What steps were involved in your application process? Let us know in the comments section below.