Here are some tips to help you navigate the ‘high risk’ waters if your business has been pegged with that label.
At first, I would just send in applications and hope for the best, cross my fingers and hope that the evil underwriter would just approve the file.
Through the years I learned that the underwriter is not always the enemy, although they are sometimes the bearer of bad news when it comes to approvals for my clients. I have learned to put myself in the position of the banks and people they represent.
An underwriter is often the last line of defense for a financial institution. Their whole job is to analyze risk. They have their own metrics for how much risk a certain business and person carries.
Let’s talk specifically about a business looking to accept credit cards. Most merchant processors have their own list of who they define as a high risk merchant. I’ll give you an example of 3 that will be high risk no matter what:
Cannabis and CBD Oil companies
This is a business that is still in the grey area as far as what is deemed legal and illegal. State laws are different than federal laws. For example, to sell these products online and to accept credit cards, they will need to be hemp based and below a certain percentage of THC. It needs to follow the federal law even if that is completely legal in that certain state. Good news is that I’m seeing more approvals and more banks are beginning to accept this niche.
I know that your online marketing business is not like the rest and you ACTUALLY get the results that you say you do. The fact remains that many online marketing companies don’t get results and that does not help your industry. 2 major factors come into play about an online marketing company. First, the fact that most of the payments are taken over the phone or online makes it higher risk right off the bat. Card not present moves you into a different category and more background checking is needed. Second, it’s an industry of chargebacks. I know, things happen, the leads were fine but the customer just didn’t follow up effeciently. I get it! Even if it’s not your fault, there is still the risk that these things might happen. If you show strong financials, good credit score, and a history of minimal chargebacks, you have a wonderful shot at approval.
I’m sure you can use your imagination as to what this means. Adult toys, strip clubs, and adult video places. Yes, these would be considered high risk. These establishments run into their own can of worms even when their intentions are to run a profitable business. There are a high number of chargebacks, theft, and money laundering associated with this industry which is why most processors stay away. Like every other industry, good financials, good credit score and a good amount of time in business will up your chances of approval and better rates.
I hope this info was helpful, if you have any further questions, please jump on my calendar. I’m happy to discuss the best strategy for approving your business for a merchant account.