Can I get a merchant account with bad credit?

Short answer, yes. We have one of the highest approval rates in the industry regardless of the signer’s credit rating. We attribute this to our dozens of processing partners across the globe. Since we don’t work with just one bank/merchant service provider, we can often make offers where other processors fail. In extreme cases, we may be able to offer merchant accounts that do not even conduct a credit check.

If you’re starting a business for the first time, you may wonder why your personal credit standing affects your ability to get a merchant account. In the first place, it’s your business, not you personally, that is applying for the account. Second, with a merchant account you are not borrowing money, you are receiving money as payment for your products or services.

While all that is true, banks and processors are still very concerned about your personal credit standing during the underwriting process. There are good reasons for this. When your business accepts a credit card payment, the bank is fronting the money until your customer pays the credit card bill. If the customer ends up not paying, for whatever reason, you have the responsibility as the business owner to pay — and, if your business or you personally do not have the funds to make payment, then the processing bank has to pay.

Thinking about it this way, it’s easy to see why the merchant account issuer wants to make sure you have sound finances and have demonstrated the ability to handle finances responsibly. If you have had personal bankruptcies, accounts that have gone to collection or no credit history at all, banks will be very reluctant to approve your application — although as we mentioned earlier, we have options to deal with even extremely challenging situations such as that.

Timing is important when applying for a merchant account. We always recommend that you do everything you can to build up your personal credit score before submitting the application. If you can resolve collection disputes, reduce the amount of outstanding credit you have, get paid up on delinquent accounts and clear up any other issues, you’ll be in a stronger position to satisfy the bank’s underwriting requirements. That said, credit history does involve history, so some time may still be necessary before your credit report has dropped those red flag issues from view.

If you have bad credit and are approved for a merchant account, some restrictions or special features of your account are important to understand before signing a contract. In particular, you may be required to maintain a reserve fund with the bank. This is a way for a bank to reduce the risk of having to pay when your customer doesn’t make payment. Over time, as your business establishes a good financial history, reserve requirements may be reduced and ultimately eliminated. Reserve funds are sometimes challenging for a startup, as they tie up capital and can adversely affect cashflow. Nevertheless, the advantages of having the ability to accept credit card payments usually outweighs the difficulties of establishing an account — and our goal is to help you make that happen.

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