What are the requirements for merchant account

Question

What do you need to apply for a merchant account? What do you need to have to receive an approval?

Answer 1

Merchant account where? With whom?

Answer 2

When applying for a merchant account you'll need the following items:

1) Verification of a US business checking account (a voided check works just fine)

2) Verification your business is legal (any document from the local, state, or Federal government works just fine. This includes Articles of Incorporation, LLC paperwork, Federal Tax ID, Occupancy License, State Tax ID, Fictitious Name Certificate)

3) A signed contract (provided by your merchant account provider)

Additional documentation is usually only required if your merchandise or account is considered high risk (e.g. there is a high risk for chargebacks). But this is rare. Personal financial documents should never be asked for, even for new businesses, as they are unnecessary.

You do not need to be a US based business but your business does need to have a legal US address and a US checking account. Otherwise it may be based on foreign soil.

Being approved will be based on the overall risk of your account. The higher the risk, the less likely it will be approved. Conversely, the less risk you present to the bank, the more likely you will be approved.

Risk is determined by several factors including:

1) Environment: The Internet is the highest risk and retail stores are the lowest risk.

2) Product sold: High stereo equipment is high risk, coffee mugs are low risk.

3) Personal credit: The better your credit the better your chances of opening a merchant account.

They balance the risk associated will all three areas and determine if it is worth it for them to take on your account.

Establishing a merchant account can be anywhere from a smooth and easy process to a nightmare. Where it falls is both the product of the merchant account provider and the merchant themselves. The better the communication between the two the smoother and faster the process is.

An account can be opened in as little as four hours or as long as a few days depending on when the application is submitted and the underwriting guidelines of the processing bank. The application process should never take longer then that without a clear and legitimate reason. If your application is taking two weeks to be approved and you’ve had little to no communication with your sales agent, something is wrong and you should consider canceling your application.

All merchant account providers require that every business sign a contract when establishing their merchant account. At the very least this contract will specify what the merchant's responsibilities are as well as those of the merchant account provider. The entire contract should be made available to you before you sign it.

When applying for a merchant account most small and medium-sized merchants will notice that a personal guarantee is required to establish the merchant account. A personal guarantee basically says that if the business cannot fulfill its obligations to the processing bank then the processing bank can legally pursue the guarantor to fulfill those obligations. This basically means if your business owes the processor money and it does not or cannot pay then the bank can come after the guarantor seeking those funds.

The reason why the processing bank does this is because of the high risk they are exposed to due to the nature of their business. If a new merchant commits fraud or just mis-managements their business and merchant account, the processing bank can be on the hook for a large sum of money. Naturally they wish to protect them from this scenario as best they can. By having the owner put their personal assets behind the business they mitigate this risk.

I highly recommend reading the article below. It covers everything you need to know.

Answer 3

Stymee7 has already given you an overview of the merchant account process. I would like to add a few things.

In order to apply for a US-based merchant account, you have to comply with the following requirements:

1. Your organization needs to legally registered within the US. Applicants for merchant services have to be either incorporated as businesses within the state that they reside in or they have to be registered with the local municipality and obtain a "Doing Business As" (DBA) name. Individuals are not allowed to establish merchant account processing services. It is a good idea to obtain a Tax ID but if you do not have one, you can use your SSN instead. Foreign establishments are also excluded from obtaining US-based payment processing accounts.

2. Your organization needs to have a physical address and a registered agent within the USA.

3. You need to have a bank account with a US bank. This will be the account into which you will have your funds deposited into.

If you meet the above requirements, you will be able to go ahead with the application process. Generally the following documents will be required during a merchant account application process:

1. A merchant application - you will have to complete and sign this form. It includes general information about you and your business.

2. A copy of your organization's Articles of Incorporation, unless you are a sole proprietor.

3. A copy of a voided check for the account that you will want your money to be deposited into.

4. Advertising materials.

5. Business or personal financials. Your tax returns for the last two years may be requested if your business is new.

Once all required paperwork is submitted, the set up of your merchant account should take no longer than two business days.