Applying for merchant accounts can be intimidating; this is especially true for new business owners who have never been through the process. Every time a business owner uses their merchant account, they create risk for the processor. If a business owner has never had a merchant account, the processor needs to take their personal credit score into account before giving them the ability to accept credit cards.
A merchant account is a line of credit, so business owners will be evaluated on their personal credit history. If an owner has a bad personal history, they might have a hard time getting a merchant account. Some processors allow owners with poor credit ratings to get an account with certain stipulations; they can use their credit card processing services, but they have to pay a rolling reserve or agree to an ACH delay.
It’s always good for business owners to be honest with the processing company; if the processors find out that they were lied to, then they are very unlikely to extend a line of credit to the vendor. When an individual tells the truth about their credit history, they can figure out what companies are willing to take a risk on their business.
If a business owner believes that their credit history is going to prevent the from getting a credit card processing account, they can have multiple people co-sign for their business. Employees and trusted friends can help the owner boost their trustworthiness in the eyes of the processor. When using a co-signer, it’s always smart to use people who have an excellent credit score. Using people with low scores never helps the business owner, and it might make their business look worse.
Typically, merchant processors require that the people co-signing have a major title in the organization. Sometimes, they’ll accept applications from owners who have close family members signing for them. If the owner’s company is registered as a LLC or corporation, they have a better chance of approval.
Owners with personal or business tax liens have a hard time getting merchant accounts. When someone has a lien on them, they are considered a very high-risk person for the lender. Typically, a lien will stop processors in their tracks; if they find out about one, they’ll almost never agree to give that person a merchant account.