Merchant Account Application Requirements

Processing a merchant account application consists of several steps. The applicants and the type of business they are operating are given a thorough examination. It can become tedious at times, and that’s why it’s important to have accurate foreknowledge of what the application consists of, and what you are agreeing to.

Merchant accounts are considered to be a form of credit, essentially a credit line, issued by a merchant bank to the merchant. When a payment has been processed, the merchant bank will usually receive it by the end of that business day. The payment then has to go through the process of having the interchange fee removed as well as a processing fee. The customer’s card-issuing bank will receive a request for payment, as well, but not before the remaining amount from the above described transaction is directed to the merchant’s bank account.

You will receive your payment before the merchant bank gets their funds, which essentially is the reason for the application process. It has been designed to establish a customer’s line of credit and ensure the trustworthiness of the principals of the merchant’s business. Meeting certain requirements is the only way that you will have the opportunity to implement a merchant account for your business.

Below is a list of some of the specific requirements, steps and procedures that you will encounter on your way to receiving a merchant account:

Application for the Merchant Account

With this document, you will submit information regarding the business and yourself, and any partners or shareholders if you have that legal structure. More specifically, your addresses (business and personal), Social Security number or other Federal

Tax ID (if applicable), phone and fax numbers, email address, website address, bank account info, trader references, etc. This is a very, very serious application process, and you need to be prepared.

Personal Guarantee

Businesses that are new to the game, or even some that have been around for a while, may need to make a personal guarantee before establishing a merchant account. This is another safeguard for the banks.

Articles of Incorporation

If you are a corporation, be prepared to submit your Articles of Incorporation and recent minutes. Sole proprietorship’s are required to provide their “Doing Business As” (DBA) names and paperwork, while partnerships must present appropriate documentation of that legal structure, as well. Individuals cannot set up merchant accounts.
Business License

If you conduct business on a regular basis you will normally need to obtain a legal business license or permit from your local city and/or county. You will need to provide a copy of it at some point in time.

Business Financial Statements and Plans

Submission of financial statements is always a requirement unless you are a business that is just beginning. If you are a new company, be prepared to provide them within a specified term beginning from the application date. For a startup, the business plan will be required, but in and of itself it cannot establish and credit or credibility. Without “financials,” as they are routinely called, the other pledges and guarantees will come into play.
Personal Financial Statements

These particular statements are usually requested in lieu of the financial statements for sole proprietors. Personal financials may need to be submitted in addition to business ones, as well. Personal tax returns for the last several years may also be required. Remember, the more information you can present, the better, and this is particularly important for unincorporated and/or new firms.
Processing Statements

If you are a merchant who is currently receiving credit card payments and are in need of new or expanded service, or wish to change banks and/or processing companies, you will be asked to produce a certain number of your most recent processing statements.

Voided Check

Sometimes, a voided check must be issued for the bank account that you are having your funds deposited into. The check has to have your legal or “Doing Business As” (DBA) name printed on it. If you’re still waiting for your checks to arrive, your bank can give you a letter providing the accounts details. Again, this type of documentation is normally not required of corporations that have been in business long enough to establish trade references, a D&B rating or other mark of business stability.
The application process can seem long and tiresome, but you should consider how you extend credit in your own business. Clearly, you want to know with whom you are doing business, especially when they are asking for “an open account.” You have to understand that it is business, it is not personal, and no one will single you out for poor treatment because you are a small or startup firm.

Also, any guarantees or bonds that you put in place to secure the account can be dealt with in the fine print of your contract. You can arrange with the merchant bank and/or provider firm to renegotiate the collateralization at a certain future date. If you are doing good business and have chargebacks and refunds within accepted, low ranges, you stand a good chance of getting that money back. All that the financial institutions want to know is that you are an honest, disciplined businessperson and that you pay your bills on time. This outlook works to your advantage, of course, because being this kind of person is what will help you establish yourself with not just the merchant bank, but the broader business community. And that’s good for business!