Business Credit - Credit Card Merchant Status for Small Businesses
In todays society, most people expect to pay for their purchases with credit cards
. In fact, almost one-third of United States customers use credit cards. Therefore, it is essential companies provide this payment choice to their patrons to prevent lost sales.
Credit card services will assist in your companys growth. This is applicable to all types of businesses. Storefront shops, online or mail-order companies, or whatever type of business you run, will benefit. To provide this service, you need to establish a merchant status. This is done through applications to various banks. Once you have completed this process, the likelihood your business will succeed has extra potential.
Basic Elements of Merchant Status
Your first step is to affiliate with banks of your choice. This is done by applications for merchant status. Once your applications are approved, the banks will enable you to receive money transfers in exchange for the credit card payments. The responsibility for collection of funds from the customer will belong to the banks. You should receive these transfers within one or two days of the credit card transaction. In turn, your business will be charged a commission of anywhere from 1.5 to 5 percent per transaction. Equipment rental and monthly support charges may also be applicable.
Banks Requirements for Merchant Status Applications
There are many components the banks consider before merchant status is granted. Applications for merchant status may have comparable requirements as loan requests. Your complete financial situation will be investigated. The banks will ascertain whether credit card payments processed through your business is viable. Some of the factors to keep in mind are:
What kind of business you run: This will influence the degree of difficulty in obtaining merchant status. Stores may undergo a less rigorous process prior to approval than, for instance, a home-based business. Also, how long your company has been in existence may play a role. Longer established businesses may receive status faster. Lenders assess the degree of risk they are exposing themselves to based on these statistics.
Sales History: A company with a proven profitable sales history has an advantage over a newly established business. Lenders want to be assured your business will generate sufficient income in the form of the commissions discussed earlier.
Credit History: Your personal and business credit histories will undergo indepth examinations. Banks place heavy emphasis on this information. If you have prior merchant accounts, the bank will likely seek confirmation from those lenders on your credit standing.
Preparation for Merchant Status Applications
You need the following documentation for the banks examination:
1. Your business plans, including financing sources and operations details;
2. Business credit report. It is best to request this report prior to submitting your application; and
3. Personal credit information.
Having this information available when you make your merchant status application will simplify and speed up the process.
The most important element of your application is an impeccable credit score, both on a personal and business level. Prompt payment of your creditors accounts will ensure your rating is favourable.
Although you may feel that your small business does not merit requesting merchant status, there are numerous benefits to companies of any size:
customer convenience;
increased sales;
improved cash flow;
company growth.
These are attributes all business operators strive for and, receipt of merchant status, will be set you on the road to attaining success.
Business Credit - Credit Card Merchant Status for Small Businesses
By: Frank D. Maglori
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