Bad credit or not; business must go on! And if you expect to accept credit cards from your buyers, then a merchant account is a basic necessity for you. A merchant processor receives your credit card sales for a fee and links transactions to your business checking account. Every processor has their unique criteria for merchant account approval. Most of them will look at your credit. Luckily, some account processors will offer you a bad credit merchant account.
Here are things to take into consideration when seeking a processor.
Your Business Structure
For C-corporations with an EIN (employer identification number) or Limited Liability Company, your processor may review credit to verify your identity as the owner. So you might want to seek an EIN form the Internal Revenue Service for an EIN as it may be a necessity for credit card processing.
Your Business Industry
A firm in a high-risk industry raises red flags for the merchant account processor. This means they may pay more attention to your credit report if you’re risky than they would for a low-risk industry merchant. Niches like gambling, adult entertainment, and pharmaceuticals are classified under high-risks. Always prepared for a higher fee if you operate in a high-risk industry, but that does not mean you shouldn’t compare options.
Credit and discount rate
Your credit determines the discount rate you pay to have your transactions processed. Every time a client swipes their credit card at a terminal, the processor receives a pre-determined percentage called discount rate.
A lower discount rate means you keep more cash per transaction. Retailers with bad credit are naturally subjected to higher discount rates. Any score below 619 is considered poor credit. Make sure you have checked across the market before settling for a sky-high discount rate just because of your credit status. Moreover, you can have the rate lowered as you keep building a rapport with the processor.
Note that a discount rate is not the only fee to look at, check for a service provider with a lower application, equipment, and other related costs.
Check with Your Bank
Some banks offer merchant accounts. If yours does and you have an active business account with them, then you may get a merchant account in spite of your bad credit. Banks sometimes overlook your poor credit if you have another positive account with them. You’ll probably enjoy lower fees and startup charges for your merchant account if you open one with the same bank that runs your checking account.