When you are opening up your business you need to realize that you will have to get some type of business credit to get the items that you need to have. This is when you should know more about how being a high-risk merchant can impact your business. Once you know about this it will be very easy for you to find an account that will be one that you are going to like to have, but also makes it easier for you to know how your business type is going to impact your business over the long term.
- You Get Unsecured Credit Transactions
This is something that you may not have thought about before, but when you are getting a credit card transaction the company will usually have a third part processor to get the funds. This company will forward the money to your account on the guarantee the customer will reimburse them. However, if the customer makes a charge back then you will have some problems in getting the money from the customer and this makes it harder for the processing company to get the amount they need to have as well.
This, in turn, makes it into a higher risk transaction where your business gets the money. However, if the customer decides at the last minute to start a chargeback they are going to get the money back and if your account does not have the funds inside of it to cover the chargeback, then the processor will be responsible for the money coming back to the customer, but only if they end up winning the chargeback case. If they lose, then you are not going to be a risk for losing that money and neither is the processing company.
- Expect To Have A Harder Time Getting Through Underwriting
This is going to be a factor that you may have never thought about before, but when you are getting a loan for your business, which is commonly required to start up, you will face a harder time going through underwriting. That is because your higher risk merchant will have to undergo some of the stringent test and this often means you will have to get a great business plan in place, but also have some patience as the underwriting process can take you quite a bit longer to get through than what you were expecting.
What else you need to realize is even if your business has an impeccable credit history, you may not get through the underwriting process. That is because your bank or the underwriters may view your business as being in too much of a risk category for them to take. So you will want to know that you may not qualify for some of the loans that the other businesses in the same type of field would be able to get because of their credit history.
- Fees May Be Higher
As we mentioned in the first line where you are going to get the unsecured lines of credit each time you make a credit card transaction, you need to realize that you may end up paying more in fees than what you would expect. Since this is the case, you will want to know more about the fees that you are going to pay and how they are going to be factored out.
A typical fee will be variable depending on the number of transactions you make. This can include something like 30 cents and 2.9 percent of the price of the purchase. However, if you are considered a higher risk merchant you could be paying the same base price, but your fee could go up to even as high as five percent of the purchase price. So you will want to make sure you know about this or you could end up paying quite a bit more for the price of doing business than the company next to you that is not considered a high risk merchant.
- What Is A Common Way To Be Considered High Risk
This is definitely something that you are going to want to know about as well. That is what exactly is going to make your business seen as being one that is going to be a high risk. Well, there are a couple of factors that will be going into making this decision and each of those are something that you will want to know about as it will make a difference in getting to have a business that is high or low risk.
A common factor is going to be having your accounts closed from other banks because of the way the chargebacks happened or having to many fraudulent charges. This is the main way that you will be considered a high risk business for a merchant account. So you will want to make sure you know about this or you could end up thinking you are being accused of being a high risk business falsely.
The other common way to be considered a merchant services for high risk businesses is by being in a certain type of business. For example, a pawn shop is considered a high risk merchant. So you will expect to see the higher fees and sch when you are running this type of a business. Then you will want to make sure you are prepared for this type of risk or you could have some problems in getting the understanding of why your risk would be so high.
When you are running your business, you will need to know if it is going to be a high risk business or not. By knowing about how the high risk business classification will impact your business you will be able to know if you are going to be able to operate your business right or not. You just have to remember that with a high risk business everything that you do associated with your business credit is going to cost you more than what you would as a low risk business.