Learn key tips to save your business money and quickly get a new merchant account if yours becomes frozen due to regulatory changes!
Lots of business owners in the smoke and vape industries have recently dealt with both changes to state regulatory guidelines regarding the sale of E-cig and tobacco products as well as changes to the local tax rules that regulate the cost of E-cig products. Many merchants that I talk to on a daily basis express fear, dismay, confusion, and most usually anger regarding these changes and don’t know how to position there business moving forward. Knowing exactly what changes will occur before they happen is most times impossible, and executing business plans in an uncertain fiscal and legal environment has left many owners in the industry strained at best.
To combat this uncertainty it is possible for business owners to arm themselves with knowledge that can aid them not only cut costs, but ensure that the risk of their payment processing being interrupted because of regulatory changes is lowered. With the recent IPO of First Data, the largest processor in America, many businesses have found their processing interrupted as the perceived risk level of their business has increased with most processors. This article will walk through not only how to save more than 10% on your processing costs but also have to ensure that if your payment processing is interrupted you can get a moderate to high risk merchant account quickly with an A+ rated company.
Simple Steps to save more than 10% for your High Risk Merchant Account
When you are having trouble getting a merchant account it can seem that every day you aren’t processing payments you are losing a bit of your business. Most of my clients have processed successfully for a couple of months ( or years even) and then suddenly experienced a full stop in their payment processing. During this time most business owners forget that they still have leverage. Processors make money by charging a rate higher than the true cost of what it costs to process payments. For high risk merchants most processors have to make associations with many underwriting banks. Those banks all have what is called a “buy rate”, or simply put the cost of doing business with them. The higher the buy rate with the underwriting bank, the higher the rate that you as the merchant get quoted.
By knowing this simple fact, you can arm yourself with the knowledge when positioning your business for a quote. The best way to find the lowest rate lies in simple fact that the processor that has the best partners will have the best options in terms of buy rates. The buy rate that a processor has with an underwriting bank is a highly guarded profitability secret and unless you are part of that organization as a partner you won’t know exactly what the buy rate (and thus the profitability margin for that processor ) is. Your job now becomes finding the most well connected processors that have the lowest buy rates with their banks. Two websites that are great resources in this regard are http://www.merchantmaverick.com/ and https://www.cardpaymentoptions.com/. Check us these websites and look for highly rated processors and you will be ahead of most merchants in America.
When talking with a processor ask them point blank how many partners they have for high risk businesses and if they are reputable. The more high quality partners that a processor has the lower the rate you will get quoted out right. These processors are not just being “nice”, even though some really are excellent organizations. They literally have a lower buy rate with their underwriting bank and can profit more even though they are pricing you lower.
Things that you can do to make your business look less risky to the underwriting bank consists of obtaining chargeback prevention services and asking the processor what paperwork the underwriting bank likes to see upfront. Showing that your business is primed to grow or if it is already successful and processes at high volume are great indicators as well as showing that your business process now will stay profitable and will also show the underwriting bank and processor that they can profit from your business with less risk and for a longer period of time.
By showing payment specialists that you are an informed business owner you will automatically change their approach with your business. They will assume that because you know a little bit about the industry you will have also be looked at (or eventually find) their top competitors. Now their job will be to quote you below their competitors just to keep your account. As an example, one client of mine processes $250,000 a month regularly. Before I placed him he was processing at 6% of his total volume. By utilizing these techniques we were able to get that down to around 3% fairly easily. The savings for knowing that key piece of information will average around $7500 a year, not bad for just being a little more informed.
Case by Case: Understanding Why It’s More Difficult For Your Business To Get A Merchant Account
Every High Risk Business is dealt with on a case by case basis. Like we just learned every processor has made partnerships with underwriting banks. Most have 1 or 2 that are their primary partners , while others have 7-10 ( First Data likes to use Wells Fargo for example ). Every bank has their own underwriting requirements and regulations and different definitions of how they define “risk”. To some banks every business in a certain industry is considered high risk, and to another bank that industry is considered every day run of the mill. Knowing which banks can place different industries and making partnerships with them is what makes a processor flexible and able to process payments for many different business types. Here a 3 quick ways you can find out if your processor has a partnership with an underwriting bank that understands your industry.
1.) Look for A+ rated processors from reputable sources. Generally speaking the higher the rating from independent sources the better the processor. Good processors are always on the look out to make partnerships with banks that will accept different industries. The more partnerships a processor has the more likely it will be able to place your account and the more knowledgeable the payment specialist will be in general. Make no mistake however, some business take a lot of time to place and depending on your current situation it might be difficult to convince a processor to work with your business. Generally speaking the easier you make it for the processor to find you a solution the higher your likelihood of getting approved.
2.) Search forums/Facebook groups that your industry frequent. Looking on online forums those other business owners in your industry frequent is a good way to research what processors are working for others in your industry. If someone has a new solution for processing they may post it on that forum or page. A lot of times business owners will share pain points as to why their businesses are getting shut down or frozen and who is boarding them.
3.) Call a processor and point blank ask them if they board businesses in your industry if they process over $100,000 a month. If the answer is a tentative “yes” that means they have a solution for your business type, but only if it is “worth” it to the bank and processor.
If your business processes less than $100,000 a month or is a new business then having the write paperwork before hand and asking the right questions can convince the specialist that perhaps your business is worth the effort to get it approved. These questions are
A.) What paperwork do you require up front and what would most likely be needed down the line?
B.) What primary questions do the underwriters ask, and if possible what could I provide in writing preemptively to get approved quicker?
C.) Is it possible for me to scale up and stack merchant accounts with this processor? (A lot of banks will place a reserve account on a higher risk merchant).
By using the techniques above your business can save money and get a merchant account regardless of what regulatory changes come in your state. SVBS
Alexander Price is a Business Consultant at Payline Data, an A+ rated processor and one of the highest rated merchant service providers in America.. Alexander works in finding payment solutions for merchants in many different industries and works with a team of payment professionals to help business owners achieve their goals. He attended the University of Chicago and enjoys running by the lake, reading books, meditating, and helping business owners achieve their goals! For more information or a free consultation for your business email: [email protected] and schedule a time to see where you are, identify where you want to go, and then make a plan to get you there fast.Alexander Price is a Business Consultant at Payline Data, an A+ rated processor and one of the highest rated merchant service providers in America.. Alexander works in finding payment solutions for merchants in many different industries and works with a team of payment professionals to help business owners achieve their goals. He attended the University of Chicago and enjoys running by the lake, reading books, meditating, and helping business owners achieve their goals! For more information or a free consultation for your business email: [email protected] and schedule a time to see where you are, identify where you want to go, and then make a plan to get you there fast.