Any regular person faces obstacles related to not having a favorable financial background (it’s harder to get approved for loans, take out a mortgage, etc.).
However, a poor financial background can make or break your ability to scale as a business owner, especially if you’re a high-risk merchant facing already difficult obstacles to overcome.
Why, you may ask?
Well, that’s because processors simply aren’t very keen on working with risky businesses already. Add bad credit to the mix, and you’ll be looking at very limited options to start processing your transactions.
That doesn’t mean you’re out of options, though! Nowadays, there are a few simple routes you might be able to take to better your chances at scoring a reliable payment processor despite the bad credit, which we’ve highlighted below.
Why Credit Matters in Merchant Account Approval
A merchant account is a special bank account made for businesses to process payments safely and securely.
It’s an essential part of the sales process to ensure everyone gets their cut and the data is handled with care. Obtaining an account as such, though, requires a few checks conducted by your chosen processor.
This application and approval process involves many legal documents and bank statements and will likely reveal any sign of poorly managed finances (including your credit score), which will make it less likely that your application will be approved.
That’s because, for an acquirer partnering up with a business classified as high-risk, it means there is already potential for financial (and legal and reputational) risks. Having nothing else but expenditures to show on your bank statements, unfortunately, only worsens your case.
It's definitely harder to get approved if you have bad credit. You should consider adding someone else to the company who has good credit to balance out the application.
The Main Challenges of Getting a Merchant Account with Bad Credit
Regardless of the kind of financial history you have, getting a high-risk merchant account takes time.
While a standard merchant account only requires signing up and sending in the basic information, getting a specialized merchant account calls for a whole lot of preparation and back-and-forth communication with your acquiring bank.
As mentioned above, bad credit, however, will more than likely make the process even more difficult.
Unfortunately, being categorized as a high-risk merchant means that there are only so many processors willing to take on the risks of your industry. Factors like highly regulated goods, high chargeback rates, fraud risks, and, frankly, bad credit reduce your options even more.
Bad credit shows you can't control your assets very well, which is important in high-risk industries, as payment processing companies are already having to take on more risk when working with you. Bad credit is a sign that it's not just your industry that makes you risky — it's potentially your financial habits on top of that.
The Most Common Obstacles You Should Know About
So, you’ve decided to open a high-risk merchant account despite your bad credit. Great! We support that (and can help, by the way).
However, before you apply, it’s important to know what you’re getting yourself into.
Mainly, if you’re able to open a dedicated high-risk merchant account, the odds are that the proposed terms won’t be as beneficial as they would be if your finances were in order. Most commonly, merchants, in these cases, end up with longer contracts and stricter terms.
And then there are the fees. The harsh truth is that, yes, you’ll likely have to settle with higher fees for at least the first quarter of your contract.
That’s because high-risk merchant accounts need a lot more attention than lower-risk ones. This means that your transactions will have to be monitored and analyzed to ensure your revenues aren’t on the decline, of course.
How Does This Impact Your Business Operations?
If getting a merchant account seems like too much trouble and you’re considering proceeding without one, we urge you to reconsider.
Why?
Firstly, not having a specialized merchant account can significantly hinder your business’s growth, especially in industries considered riskier than others.
That’s because, to keep your business in good standing, you’ll need to ensure you’re in compliance with the ever-changing regulations of high-risk trades. That, although, is hard to do on your own if there are a hundred other things to keep in check.
Secondly, without a dedicated merchant account, you may be putting your company’s cash flow at risk since you won’t have a reliable method to process the transactions. This can result in delayed transactions and unhappy customers.
To add to the latter, by not having structured payment processing solutions in place, you’re not only jeopardizing your customer satisfaction but also making your whole business more vulnerable to fraud and chargebacks. This can make managing your finances harder than it has to be.
So…What Are the Options for High-Risk Businesses with Bad Credit?
As mentioned, you’re not entirely out of luck if you find yourself needing a high-risk merchant account with bad credit! Here are two routes you can take.
Find a Merchant Account with No Credit Check
Some payment service providers offer merchant accounts with no credit checks. While this might be the only option for some merchants, there are a few things to keep in mind before choosing to work with this kind of processor.
Often, these types of solutions come with stricter terms you might not like, as the provider would have to overlook the essential risks and ensure they’re not in for excessive financial losses.
On top of that, there are usually additional hidden fees involved.
Work with High-Risk Credit Card Processing Companies
Although it might be a struggle to get a high-risk payment service provider to work with you if you have bad credit, it’s always better to look for a reputable high-risk credit card processing company.
Companies that work with high-risk businesses have experience handling payment systems and issues in such industries. They understand the ins and outs of these complex trades and have learned about it all through trial and error—actual hands-on experience.
Working with a provider with an established track record will not only give you peace of mind but also make managing your business easier in all aspects.
At FastoPayments, for example, we have taken our years of experience and put it into practice through the 24-hour support we offer our merchants, along with modern fraud screening, chargeback prevention, and other security tools we utilize.
This is to ensure that even merchants with less-than-ideal financial backgrounds can make the most of their business and move forward with better odds.
💡We don’t just talk the talk. We walk the walk. Browse our customer success stories to see what we’ve done for other high-risk merchants.
Steps to Secure a High-Risk Merchant Account with Bad Credit
When applying for a dedicated high-risk merchant account with bad credit, the best tip we can give you is to do your due diligence.
The application process involves many legal documents, and it would be silly to get declined because of a careless mistake. This can even happen to merchants who have perfect credit and a thriving low-risk business.
That’s why it’s wise to consult a professional, especially if you’re not sure where to start or what’s expected of you.
In addition, we’ve gathered some tips and other ways our payment experts have helped merchants with challenging financial backgrounds.
Repair Your Credit
While there are professional credit repair services you can access these days, it’s always smarter to start from the very root and try repairing your credit on your own.
To do that, some actionable steps to take include:
Paying off any outstanding debts
Ensuring the high-quality of your goods or services
Studying the demand of your products
Keeping your site secure and compliant
Providing clear return policies on a designated sector on your site
Offering top-notch customer support
Getting professional advice to move forward and mitigate the risks
Prepare Your Application (Properly)
Once it’s time to submit your application for a high-risk merchant account, you’ll want to be as prepared as possible. No one wants to receive a poorly filled-out application, especially if the bank statements don’t look very prolific.
So, before you send in your application, ensure you have included all the necessary information and are showing your business in the best possible light.
Try to Negotiate Terms and Fees
Because of your business’s background, you likely can’t convince your processor to offer you the most favorable terms from the start. Therefore, it’s key to ensure you understand what you’ll be paying for.
So, contact your chosen provider before signing the contract and talk everything through. This way, you might even be able to establish a trusting relationship with your processor, which will come in handy when it’s time to discuss the terms in the near future once you’ve proven your abilities.
Or, Explore Other Alternative Payment Solutions
If you’ve found yourself getting rejected again and again, and it seems like no acquirer is willing to partner with your business, there are a few alternative ways to start processing your payments.
While these methods below are more of a last-resort kind of option, it is worth exploring every route just so you have a backup plan in the worst-case scenario.
Third-Party Payment Processors
A third-party payment processor is a payment service provider that allows merchants to process transactions without a merchant account.
These types of service providers can be viable temporary solutions for businesses looking to start processing without opening a merchant account (or for those who just cannot obtain one).
While they can be convenient for some establishments, it wouldn’t be the best long-term solution as you would be getting minimal support and not the kind of personal approach a high-risk business calls for.
Some of the most known TPPPs include:
Stripe
PayPal
Square
Amazon Pay
ACH and eCheck Payments
eCheck payments are another practical payment method for a merchant who can’t get a dedicated merchant account.
These electronic checks process payments through ACH (Automated Clearing House) by directing funds from the customer’s bank account to the business’s account.
Again, while this may be a decent solution if there are no other options, using eChecks as your business’s primary payment method can be complicated.
Although eChecks reduce human errors when conducting payments, dealing with an eCheck might take a lot of time.
If an electronic check bounces back due to insufficient funds, for example, it’s way harder to resolve the issue, and you may still be hit with a chargeback fee. On top of that, the acceptance rate for eChecks is rather low.
Work with FastoPayments to Get a High-Risk Merchant Account with Bad Credit
Don’t let bad credit affect your chances of accessing high-quality high-risk merchant services you need to grow your business. Work with FastoPayments instead.
Get a free, no-obligation quote for a high-risk merchant account here. We’ll review your business information and get back to you ASAP.
