Small business owners are sometimes surprised they are considered to be a high risk merchant, which means they are associated with some degree of legal risk. Many times the nature of the industry you’re in classifies you as high risk (Examples: strip clubs and time shares), but other times it’s the lack of transaction history that puts your business in that category. Regardless of the reason, finding the best rates for payment processing can be challenging for any high risk business. Credit card processing companies have to protect themselves since they are ultimately responsible for every transaction that takes place in your business. Here’s how you can work with these companies to provide a secure solution for both parties.
Show Your Financial Stability
Your business may not have a long history of making transactions, but it doesn’t mean you aren’t financially stable. Many credit card processing companies will work with you if you have capital resources available, or have liquidity in the amount equal to or greater than the “high ticket limit” requested. When you demonstrate financial stability, payment processing companies can see it as having the ability to absorb a potential financial loss, so they will be more willing to work with you.
Embrace Your High Risk Status and Don’t Hide Anything
Not disclosing certain products or services in hopes of lowering your credit card processing rate can be costly. Processing companies have the right to audit every company they do business with, and it’s especially done if a business is considered to be high risk. They will eventually find out if you’re hiding something and put you in an undesirable situation. The best thing to do is embrace your high risk status, understand not every processing company will want to work with you and continue to look for the right fit.
Look Out For Reserves
Some credit card processing companies will work with high risk businesses, but they will require a reserve fund to handle issues like fraud, chargebacks, claims and others. When credit card processing companies take up to 10% of every transaction to fund the reserves, your cash flow could be significantly disrupted. There are different types of reserves companies use, so be sure to understand the terms completely so you aren’t cutting into your sales considerably.
Negotiate Periodically
Just because your business is considered high risk at first doesn’t mean it will be that way forever. Most payment processing companies need at least three months worth of statements to analyze before they will even consider negotiating rates, reserves or other components of your contract. But once you have a full three months of statements, it’s well worth the time and effort to initiate the negotiation process again.
Precision Payment Systems helps business owners find the right credit card processing solution for their business at the lowest possible cost, even if they are considered high risk. It’s important to understand that there is a right fit for every business, but sometimes it takes time and research to find them. We are here to help take the stress and hassle away for you and work to find the best solution for your business. Be sure to contact us to see how we can help you manage being a high risk merchant.
