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Bad credit history
Bad credit is common these days. But in any case, business needs to develop. And this often requires loans.
Traditional financial institutions (banks, credit organizations) in most cases refuse them to such a business.
But there are companies on the market that undertake to lend, despite a bad credit history. And such companies have gained great popularity among entrepreneurs.
Over the past few years, they have successfully entered the market and created their own niche.
Despite the fact that these companies are successful and enjoy the trust of customers, it is difficult for them to work with banks and payment service providers.
They have big problems getting approval to open a trading account with these financial institutions.
Lending to businesses with poor creditworthiness is often considered a controversial issue. For banks and payment service providers, such entrepreneurship is synonymous with a prohibited or restricted type of business.
In short, banks classify lending to companies with a bad credit history as “high risk”.
In fact, this means that no matter how successful your business is and no matter what profit you receive, if you need a merchant account, you will be immediately rejected.
Reasons such as the high probability of theft, fraud and refund by customers of such a business made it risky.
The very nature of business, which consists in issuing a loan to a company that has violated its debt obligations to the bank for some reason, is really risky.
And this risk is shifted to a certain extent to the financial institution that provided him with a trading account.
After all, if the client of such a business does not repay the loan, then this business may not fulfill its obligations to the bank or the payment system provider that provided the trading account.
How to Get a Merchant Account with Bad Credit?
Obtaining a trading account with poor creditworthiness requires several steps. However, in most cases, this process proceeds in the same way as when receiving a trading account with a good credit.
The standard process of obtaining a trading account is as follows:
- Choose a business structure for your new company.
- Apply for the necessary business licenses.
- Open a traditional bank account for business.
- Choose the payment methods that you would like to accept.
- Development and advertising of terms of service and refund policy.
- Ensure compliance with all PCI standard requirements.
- Collect documents confirming the age, size and volume of your company’s operations.
- Submit an online application for a trading account.
- Prepare for the underwriting process by collecting bank statements for 6 months and data processing reports.
- Before choosing a service provider, evaluate the cost of data processing to make sure that you get the most affordable rates for your business.
For trading accounts with a bad credit history, underwriting may require the provision of additional financial data, for example, a personal status report (PSOA) listing the assets and liabilities of your company.
This document helps third-party organizations better understand the current financial situation of your company.
Why Having Bad Credit History Is Considered High Risk
Companies working in the field of payment processing strive to cooperate with those who bear minimal risks.
Since payment processors can lose money in the event of fraud or negligence in the activities of their partners, they avoid cooperation with parties that pose a risk.
A bad credit history is considered a high risk because it indicates negligent business conduct.
If an enterprise does not have a reliable credit history, it may be useful for it to contact trade service providers who have experience in servicing high-risk enterprises.
Experienced vendors are more familiar with the rigorous underwriting procedures for trading accounts with a bad credit history, which may require additional financial information, guarantors, reserves and other guarantees.
Prone to chargebacks
A reverse payment occurs when a customer contacts the issuer of his credit card with a claim about the payment.
In case of successful refund of the payment, the trading organization is obliged to return the money to the client. A successful chargeback is registered as a “strike” on the company’s trading account.
For both sellers and payment processors, the reverse payment fee is expensive. Moreover, in some cases, processors may face significant penalties from credit card issuers due to the fact that they cooperate with sellers who have an excessively high repayment rate.
Although many payment processors cooperate with sellers with a high level of risk, you can still lose your trading account if your refund rate exceeds the established limits.
For example, payment processors believe that a refund rate of more than 1% is a high risk, but still acceptable.
However, if the refund rate exceeds 2%, it may be impossible to find a provider willing to work with your company.
Bad Credit Merchant Account Application Requirements
As noted earlier, applications for opening a trading account with a bad credit history have the same structure as traditional applications for opening a trading account.
The main difference is what documentation the payment processor requires during the underwriting process.
When applying for a trading account with a bad credit history, some additional resources that may be requested are listed below:
Bank statements (3-6 months)
Additional bank statements for a period of up to six months demonstrate the financial position of your company and its ability to generate a stable income.
Processing Statements
Extracts from processing documents reflect the history of payment processing and show the existing refund rate. (Although not all companies, especially new ones, may have such documents).
Additional information
If your company has poor creditworthiness, then you should expect more general questions in the underwriting process. Although trading account providers are interested in providing you with payment processing services, they must protect their profits.
Do No Credit Check Merchant Accounts Exist?
In order to properly conduct due diligence, payment processors must understand your risk profile. And in order to make a risk assessment, processors must evaluate your credit file.
So, yes, to get a traditional trading account, you need to pass a credit check.
However, payment service providers such as PayPal, Square, and Stripe often dispense with credit verification before allowing you to start processing credit card payments.
Although these payment service providers present themselves as a real alternative to traditional trading accounts, these services are not high-risk and are fraught with other problems, including freezing payments, restrictions on small volumes, high processing rates, account termination and many other problems.
Reliable solutions from Wellcoinex for merchant accounts for business lending to troubled companies
Are you engaged in lending to distressed businesses with bad credit and looking for affordable, but high-quality trading account services suitable for your business?
Wellcoinex, headquartered in London, is a leading provider of trading accounts for high-risk businesses for various industries.
Thanks to an extensive network of acquiring banks and experience in all high-risk industries, contacting our company is the ideal solution to meet your payment solution needs.
We offer comprehensive trading account services for businesses that provide loans to companies with a bad credit history.
Our solutions will satisfy all your payment needs and help you expand and develop your business.
As an experienced supplier, we understand the difficulties and risks associated with the high-risk concept inherent in the business of lending to distressed companies with a bad credit history. We understand and help them accordingly.
If you need a trading account, you must be honest about every detail requested by our specialists to ensure that your account is approved quickly.
We have a team of experts ready to answer all your questions, including questions about creating a trading account for your business.
Apply and contact us right now!
How Quickly Can You Get a Bad Credit Merchant Account?
If you are starting a new business or looking for a new trading account for an existing enterprise, the list of related tasks may seem overwhelming. Finding a merchant service provider offering instant approval may seem like a practical way to skip a long to-do list, but there is no such choice.
In order to properly issue a trading account, it is necessary to conduct thorough underwriting. Bank statements, business documentation, processing history and other necessary documents take time to process.
Therefore, it usually takes several days to approve an application for a trading account.
While vendors may offer expedited approval, those offering immediate approval of a trading account should be avoided.
If the underwriting process is not carried out properly, the probability of termination of the account will increase.
And it is more difficult for businesses with a history of closed trading accounts to obtain future trading accounts.
By cutting costs to get a bill faster, you may make it harder to get a suitable bill in the future.
What to Expect with Bad Credit Merchant Services?
If you or your company have a bad credit history, suppliers may require you to comply with the following conditions:
Higher Fees
If the merchant account provider believes that you pose a risk of an increased refund rate or other negative aspects, it may charge higher fees to compensate for the financial risks associated with servicing your account.
Reserves
Payment processors may require reserves from sellers with a poor credit rating.
In this case, the bank where your trading account is opened withholds a certain amount from your deposits as insurance in case of possible chargebacks.
These funds still belong to you and can be requested if your account is fixed after a while.
Restrictions on smaller volume
Trading service providers have the right to limit the volume of monthly transactions. If you create a good payment processing history in the following months, the volume limit may be increased or lifted.
Long-term contracts
Trade service providers with a bad credit history may try to conclude a long-term contract with your company. Trading service providers want to guarantee you a long business life before they make concessions because of your bad credit history.
Bad Credit Merchant Account: Final Thoughts
For sellers with an unfavorable credit history, obtaining a trading account can be a difficult task.
However, many providers are willing to cooperate with merchants with a high degree of risk and offer the most competitive tariffs.
As a provider of trading services for high-risk enterprises, we specialize in servicing high-risk enterprises and sellers.
We cooperate with companies that are usually rejected elsewhere, and provide them with the most modern payment processing available on the modern market!
FAQ
Do processors check your creditworthiness when applying for a trading account?
Yes, payment processors check your creditworthiness as part of the due diligence procedure when considering applications for trading accounts. Maintaining a reliable credit file will help increase the chances of your business getting a trading account with the most acceptable rates.
What credit score is required to get a trading account?
The lowest credit rating that a trading service provider can work with is about 550-600. Anything below this value may require the involvement of a guarantor and your acceptance of a number of conditions listed above.
Why does my credit history matter when applying for trading services?
The credit history gives an idea of the risk that a person or company is exposed to. Companies with an unfavorable credit history – unpaid bills, high use of renewable loans, litigation and other negative aspects – can put processors at great risk.
For example, if a company has a history of negative credit events, it may face a large number of chargebacks.
If a merchant account provider cooperates with an enterprise that has a large number of chargebacks, it may face thousands of fines from credit card issuers.
For many providers, customers at risk of chargebacks are simply too expensive.
How can I improve my credit history to increase the chances of approval?
Improving my personal and business credit rating increases the chances of getting a trading account, avoiding high transaction fees and circumventing other payment restrictions.