Have you just started growing your business? Are you tired of handling paper-based invoices and mail to collect payments? As a small business owner, you might consider opening a merchant account to start accepting credit cards for different transactions.
The advent of the global pandemic has significantly changed the manner in which consumers and businesses tend to interact with each other. As a small business owner, you need access to a dedicated payment processing system capable of adapting to the new reality. This is wherein professional merchant account services can help.
What should you expect from your merchant account provider during challenging times of your business? Here are some important pointers to consider:
You Need Access to a Dedicated Bank Account
Even while functioning as a sole proprietorship, you will require access to a dedicated bank account before you launch a merchant account. You can consider opening a merchant account within 15 minutes at the nearest local branch. All that the providers will require are your business license and the Employer Identification Number or EIN. The EIN serves as the SSN or Social Security Number when you operate as the sole proprietor without any employees. It is also possible to apply for the EIN with the help of the IRS.
Your business bank account will serve as the default destination for all funds you wish to transact. It will also serve as the dedicated account wherein all transaction fees will get debited. In some cases, you can think of preparing individual debits and credits into diverse accounts. Still, you might have to put forth a request for the same.
It is crucial that you maintain some balance in the bank account. The balance should be significant enough to cover all types of processing fees along with monthly software fees -if there is a requirement.
Importance of Underwriting for Opening Your Merchant Account
Partnering banks and payment processors are known to take proper risks by offering access to merchant accounts for small businesses. Every amount that is transacted throughout the system could be potentially charged back. This would ultimately leave the banks responsible for the existing funds.
For instance, a business is processing a transaction with the help of the merchant account. However, if the business is not able to deliver the respective service or product (not able to afford payroll, they are closed, or others), the customer can go ahead with issuing the chargeback. In this case, the bank will be held responsible for issuing the refund to the customers -quite before they might have recouped the funds out of the merchant. While assessing the overall risks in association with new business accounts, banks are known to analyze both the business legitimacy and the chargeback possibility.
To make sure that the underwriting process is as seamless as possible, it is recommended to work with a professional and experienced merchant account provider. Some merchant account providers offer access to a department dedicated to assisting new merchants in setting up their accounts.
Requirement of a Business License for a Merchant Account
If you are operating as a sole proprietor in some nations, this might not be the case. However, in all other cases, there is the requirement of a dedicated business license for accessing the services offered by a merchant account. This could imply anything -right from a name-based statement to incorporation articles.
You will require a business license for reasons not related to opening a merchant account. Therefore, if you have not registered yet, it is recommended to visit the official website of the respective Secretary of State. Underwriters of merchant account providers usually review as well as file a separate copy of the business license to ensure validation.
Underwriting Merchant Accounts Require an Application
The process of underwriting the merchant account will require a proper application. Most merchant account providers deliver access to the application’s online version. With the help of the application, providers can request information about the respective business along with information about the authorized signer of the merchant account.
You will require access to a dedicated bank account along with additional information like EIN, tax ID, routing numbers, and estimates or processing volumes before starting. Some additional information required on the application can be authorized signer details, beneficial owner details, contact information, and business start date.
Different Modes of Payment Acceptance Need Different Merchant Accounts
Do you look forward to accepting ACH payments or credit cards? In this case, you might consider selecting diverse underwriting processes with distinct processors. While different types of credit cards you provide might be processed with the help of a single processor, your eCheck or ACH transactions will usually go with the help of another processor. It will typically not require access to a separate application if you take the option of the ISO (Independent Sales organization) or a reliable software provider.
On the respective application, you will get the chance to select the payment types you want to accept. If you take assistance in submitting the application, the provider will compile the application’s submission in addition to the voided check’s copy. Eventually, the provider will send the application to the respective processor. You can check the terms & conditions of the application to go through the details of different parties involved in the merchant account.
Delivery of Supporting Documents to the Underwriter
The greater is the amount you wish to transact, the more documentation will be required by the underwriter to go through with the application. If your business is only going to transact a smaller amount, you will only require providing a voided check along with some marketing material to start the process.
If you have the requirement of processing larger amounts, you are expected to provide detailed financial information. In some cases, you are expected to provide financial statements for up to 2 years like profit & loss statements and balance sheets.
Once you have received the approval for the application, the processor will go ahead with monitoring the account activity. Therefore, it is crucial to be as precise as possible when you are specifying processing volumes. You should go ahead with exceeding the processing limits.
Starting Merchant Account in One Day
Once you have completed the process of merchant account application, you can expect your account to be set up in a span of only one day. In some cases, the time limit is only some hours.
Usually, underwriters are known to operate within standard banking hours. Therefore, when you submit applications during noon, they might not be reviewed until the next business day. You can think of choosing a reliable merchant account software provider to guide you through the process of underwriting. Some providers can sync the merchant account to the software. Therefore, you can start processing transactions right away after receiving approval from the underwriter.
Same Merchant Account for Online and In-store Transactions
One of the major benefits of merchant accounts is that they remain transferable between online operation and the physical storefront. Until the platform at different locations remains the same, you can go ahead with using the same accounts. If you have access to a merchant account for your office or storefront, you can request the representative offering assistance to ensure whether or not the account is transferable.
It serves to be useful for the following reasons:
- You are not required to go through another process of underwriting
- The procedure of electronic payment processing remains consolidated
Funding Times and Processing Fees Might Vary
Based on the type of payments your business is processing along with proper payments, processing fees might vary significantly. The eCheck or ACH processor might charge some flat transaction rate up to a specific amount. At the same time, the credit card processors might also charge some flat rate along with extra percentage fee. Fees on credit cards can vary -based on the payment method and the card. It is crucial for you to go through terms & conditions on the application to understand the existing differences.
The varying rates are crucial to be noted down when you have access to different payment options. If the customer wants to pay through ACH by offering bank account information, you can consider using this type of payment for larger transactions. It is because you will be charged some flat transaction fee in opposition to the flat rate along with the percentage of the rate.
Funding times might also be dependent on the type of payment. ACH transactions can take around 3-5 business days to ensure funding. On the other hand, credit card payments can end up in your account within 48 hours after the transaction.
If you wish to accept credit and debit cards for your business, you are expected to secure an alternative or merchant account. In the modern era, an increasing number of customers will make payments through a credit or debit card. You should search for a reliable merchant account provider to expect the best outcomes.