Some business types are perceived as high risk by merchant services providers.
You don’t need Sherlock Holmes’ deductive powers to see how jewellers and pharmacists will be seen as carrying a higher risk than, say, a florist. However, you may be surprised by some of the business types that feature in the ‘high risk’ list opposite. If your business falls on this list, or you’ve been told your venture is high risk, then getting a merchant account can be difficult. But it’s certainly not impossible. It’s the same if you have a bad credit rating (personally or professionally).
Here, we take a look at your options if your business is classed as high-risk merchant account, or you have a poor credit record.
Read more: What is a merchant account?
High risk merchant accounts and credit checks
When you apply for a merchant account, you’ll be credit checked – not just for your business history, but also its directors and any financial backers it has. (This is how new businesses are able to start building credit ratings.)
It’s possible to find companies who set up merchant accounts without performing a credit check. However, you’ll most likely pay higher fees, and there may also be limits such as the number of transactions you can make in a 24-hour period or restrictions on transaction values.
Some of the industries considered high risk for merchant account setup
Adult entertainment
Advertising services
Alcohol
Charities
Dating and escort services
Debt management agencies
Events and tickets
Gambling
Insurance
Jewellery
Membership and subscription services
Nutraceuticals
Online auctions
Pharmacies
Payday loans
Pyramid selling
Software
Tech support
Timeshares and holiday clubs
Tobacco and e-cigarettes
Travel
What you can do if you’re struggling to get approved
It’s worth contacting us, even if your business features on the high-risk list: there are so many variables to consider, that the definition of high risk varies from provider to provider. We may be able to help, or suggest a way forward.
How to improve your credit rating
If you want to get the best rates and widest range of services, then you need to start building up your credit rating.
This may not be as difficult as it sounds. Request a copy of your credit report as you may find that there’s just one area needing attention. Our article on how to improve your business credit rating will show you some helpful ways to start building your reputation, such as:
Pay your bills on time
It seems obvious, but is worth mentioning as it’s the most effective way of showing you can manage debt – but late payments can severely impact your credit rating.
Incorporate your business
This essentially separates the business from its owner, and may be helpful if you have a bad credit
rating.
Keep credit personal
If you max out on personal credit cards to fund your business, you can damage your credit rating.
Open a business bank account
Make sure it’s in the registered business name, and pay only transactions related to your business from
the account.
Take out some business credit
It’s ironic, but people who’ve chosen to avoid using credit can receive low scores. Taking out a credit
card or a small loan can actually boost your credit rating.
Close accounts you don’t use anymore
On the other hand, too much credit can make companies suspicious – and increase your risk of falling
behind with repayment.
Tap into trade credit
Not only does this let you buy now and pay later (handy if you’re getting your business off the ground)
it can also be handy when using suppliers.
Don’t apply for lots of different credit
If you’re turned down by one lender, don’t immediately apply with another. Request your credit report to see why you were declined.
It may seem like a lot of extra work, but it’s worth it so you can access better products, at better
rates – or free, in our case.
If you’re stuck, contact us – we may be able to help you make your passion pay.