Obtaining Merchant Status for Your Business

Carrying out purchases using credit cards has been the norm for many years now. Its convenient and flexible for the buyer (no limitations created by the cash in hand) and more revenue generating for the seller, as it makes it convenient for the customer to do business with the company.

It is customer friendly, as all businesses now provide the ability to the customer to pay by credit card. It is imperative to the health of any business to give the customer the option of paying for their purchases by credit card. Whether you are a small shop catering to individual customers, a business serving other organizations, or have an online store, giving customers the choice of using a credit card will increase sales and help you grow your business well.

It does take preparation and work to be able to accept the customer's credit card for purchases. You have to be able to accept credit cards. This ability is called the Merchant Credit Card Status. You have to apply to banks for the Merchant status. Once you get their buy-in, you can then proceed ahead.

It's usually hard to get the banks to approve the merchant status for you. It is much like applying for loan. There are a number of criteria they use to arrive at their decision. It is easier for storefront businesses to get the status, and considerably hard for home-based businesses to do so.

The bankers also prefer to deal with people they have long-term association with. They would investigate the overall financial health and status of your business before granting the status. They would prefer that you have been profitable in business for more than a year. They look for proven personal and business stability.

As a part of this process, be prepared to provide a number of financial documents to the banks. They will look for credit references from your distributors and lenders, references from other banks, your business's credit history, your average sales figures, documents regarding the legal structure of your business, copies of business license and seller permits, tax returns of up to last three years, etc.

Lenders would like to ensure that granting the merchant status to your company does not increase their risk in accepting payment through credit. More often than not, businesses that run out of home, or work as mail orders find it more challenging to get merchant status than the companies that have a storefront.  Already established companies will be able to attain the status much quicker than relatively newer establishments as well. If your company has been bringing in the money consistently, it will fare much better with the bankers as well.

Credit-worthiness and the confidence the market has in you (people you do business with) will help positively with the decision. Your personal and business credit histories will be examined. Previous merchant accounts of your business will be checked to get an understanding of the way your business has been performing, as well as reflect on your credit-worthiness.

These checks are done with the intention of banks to protect themselves as well as to establish a firm business relationship with you that can favorably serve their interests for years to come.

Once you have a Merchant Status, banks work to transfer the money paid by the customers through credit within one or two days of the sale. It is also their responsibility to collect the money from customers. In lieu of this, your company pays a commission to the bank, which will be anywhere from 1.5% to 5% of each transaction. This fee would be in addition to any equipment rentals and monthly support.

To enhance your chances of achieving the Merchant Status, ensure that you maintain your business favorably and establish a good credit history in your interactions with other businesses and establishments. 

While at first it may seem like a lot of work and hassle to deal with the steps needed to get a merchant account, once your business does get the ability to accept credit cards, it will be plain for you to see the benefits your business will reap from having this facility.

Resources:

Obtaining Merchant Status for Your Small Business
http://www.www.broward.org/smallbusiness/merchantacct.pdf

how to gain merchant status for your small business
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