If you want to accept credit or debit card payments from your customers, you must first secure a merchant account. For a fee, one of these providers will facilitate your transactions for you and funnel the money directly into your checking account. Although having substandard credit can make getting this type of account more of a challenge, there are steps you can take to minimize the effects of poor credit status.
What impacts business credit.
Just as is the case with your personal score, your business credit rating is based on several factors, many of which have to do with your history and payment behaviors. Just some of the components that can lead to a less-than-desirable business credit score include the following:
- Negative public records such as liens, judgments, bankruptcies, etc.
- A trend of delinquent payments for bills and other obligations.
- Increased frequency of credit applications or inquiries on your or someone else’s part related to your business.
- Factors such as outstanding balances, trade experiences, and lapses in payment/credit utilization over time.
- The nature of the industry in which you do business as well as years in operation and other demographics.
In order to obtain your business credit score, the major companies examine data such as public records, credit, and demographic information. Your risk as a borrower is calculated via an algorithm specific to each business credit bureau. The three major bureaus are Dun & Bradstreet, Experian, and Equifax. For many business owners, the reports generated by these firms do not necessarily yield a robust credit picture. As a result, carrying out crucial business-related tasks such as obtaining insurance and applying for business loans can be much more difficult to accomplish.
What to do.
If your credit outlook is not as rosy as you would like, never fear. It is still possible to find payment processing for merchants with bad credit You just need to have a little knowledge along with a generous dose of persistence.
Consult your bank.
If you have less-than-stellar credit but have a healthy working relationship with a bank, you can try seeking a credit card processing solution through them. After all, you and your business are already a known quantity with this institution. Therefore, they may be willing to overlook imperfections in your credit score based on a positive history of reliability on your part. Contact your bank’s manager to see if they offer merchant accounts. Be sure to inquire if startup fees can be lowered due to your standing as a valued existing customer.
The good news for those on the market for a merchant account is that competition in this arena is fierce. For that reason, do not assume that just because your credit may be too low for one company, that the same will be true for the next. Some vendors may have standards that are less restrictive, but be aware that this laxness may come at a financial price. In addition, keep in mind that if you are a specialty merchant working in so-called “high-risk” industries such as adult entertainment, pharmaceuticals, or firearms, you will most likely pay more in order to be accepted for a merchant account. Consider it the cost of doing business.
If your bad credit or business history are prohibiting you from getting the U.S.-based merchant account you have been seeking, you might also want to look into overseas companies since these vendors generally do not pull credit reports. That being said, it is vital that you choose wisely. Many of these lenders require you to pay huge startup fees and high discount rates.
Get a co-signer.
Getting someone with good credit to co-sign your merchant account application is one of the best ways to lower your level of risk as a borrower. Because the lender will then see that there is a second party to fall back on should you default on the loan, they will be much more likely to allow you to sign up.
Offer to provide a rolling reserve or ACH delay.
The truth is that lenders really do want to give you the merchant account you are requesting – as long as they have every reason to believe that you will hold up your end of the deal by making all agreed-upon payments in full and on time. If your credit history is causing red flags to go up and you have funds on hand to afford these strategies, consider offering the company a rolling reserve of funds that you agree to leave with them. Should you get behind on your payments, they will already have a nest egg of funds from which to draw. Also assuming that you have the capital to make this possible, you might give the lender an option of an ACH delay that would enable them to hold onto your funds for a few extra days before depositing them into your account in order to ensure the legitimacy of the transactions. This can be particularly effective if the lender is wary of the industry in which you conduct sales.
Choose your payments partner wisely.
Find a partner who specializes in credit-challenged merchants. Of course the easiest way to turn your less-than-perfect credit into the perfect payment acceptance solutions is to select a third-party provider who specializes in working with credit-challenged individuals.
At Humboldt merchant services, we pride ourselves on helping merchants with less-than-perfect credit and/or who are working in specialty markets get the credit card processing solutions they need to grow their businesses.
No one sets out to have bad business credit and there is no doubt that you should take steps to improve it wherever possible. However, finding yourself in this subpar status does not mean the end of the line for you or your business. With careful research, patience. and long-term organization and planning, you can continue growing your company and providing excellent products and services to your customers while slowly polishing your business’ credit profile.