What do I need to open a merchant account?

When you apply for a merchant account, the merchant account provider needs quite a bit of information to verify that your business is legitimate, the level of risk associated with processing your payments, and various legal and administrative details. Don’t be insulted or alarmed! The care with which merchant accounts are reviewed helps prevent scammers from obtaining them and hurting the reputation of your industry. Also, by screening out fraudulent applicants, merchant account providers reduce their risk exposure and, in turn, are able to offer you lower rates and more convenient terms.

Information you need to open your merchant account includes the following:

  1. A business bank account. To operate a merchant account, you have to separate personal from business finances. This is because the credit card issuer (the bank) needs to be able to evaluate the creditworthiness of your business operations on its own merit. Proof of having a bank account usually involves submitting recent bank statements.
  2. Physical address. Merchant account providers require a physical address to which they can send forms.
  3. EIN. Your Employer Identification Number (EIN) identifies your business for tax purposes. If you don’t have an EIN, you can apply for one on the IRS website. In addition, you need to submit the business’s articles of incorporation, which verifies that your company is on solid legal footing with the U.S. government.
  4. Business license. Not all types of businesses require licensing, but if yours does, you need to submit the appropriate documentation. Licenses vary from state to state and locality to locality, so you may have to do some checking to find out what the requirements are for business licensing, sales tax registration, worker’s compensation and other regulatory areas.
  5. Financial statements. Credit card issuers need to determine how financially responsible and financially healthy your business is. These are critically important issues, because if a customer ends up not paying your credit card charge and you are unable to do so, the bank will have to cover it. Most issuers want to see statements going back 2 years, and they may well look further back if you are in a high risk business or have had credit problems in the past. Issuers may want to see personal financial statements as well as business statements, to make sure that you personally, as the business owner, are financially responsible.
  6. Processing statements. If you have an existing merchant account and are trying to set up a new one, the issuer will want to see processing statements. In addition to helping establish the volume of transactions, this information helps the issuer determine the level of fraud risk associated with processing your payments.
  7. Miscellaneous supporting documents. Issuers may ask for several other pieces of information, depending on their internal underwriting requirements. These items may include voided checks, your business plan, sales forecasts, inventory reports and documentation of business policies.

As for eCheck, underwriting documentation varies based on the provider. Some get you processing eChecks with as little as a driver’s license and a voided check or bank letter. Others may need to collect incorporation documents and a utility bill.

If you are a sole proprietor, we will still get you a merchant account! A sole proprietor uses his/her SSN to obtain a tax ID and often registers an assumed name with the state or county. Usually, a sole proprietor needs to provide personal bank statements for approval in addition to the assumed name and EIN documents.

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