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Your Credit Score Counts!
New business owners often ask why their credit score and history have anything to do with establishing a merchant account. We want to help you understand when, how, and why your score may impact signing up for services with us, and we also want to help you improve your chances for the future. We know that it takes courage to start up a company, and that success is not always easy to achieve. That's why we want to see you make the most of the options available to you.
Why Does Your Score Matter?
When a merchant bank is evaluating your business and considering establishing a professional relationship with you, they are really considering taking a risk. As with insurance and other similar products, the bank is a business first and foremost – they need to protect their own assets. Renting card swipers and other equipment is another situation that will require good credit. Just like leasing a car, albeit less expensive, the leasing company wants to know that they will get paid for their products.
If your organization has been up and running for years, has had a merchant account already, or has built a credit history of its own, the bank will be able to look at that, rather than at you as an individual. Usually, this is a good thing.
When Does It Matter?
However, your score and history will matter a lot if you are starting up a new venture. Without a proven track record, showing that you have paid other lenders and/or maintained a merchant account with few chargebacks in good standing, the card processing company is forced to look into your own history, considering you a guarantor on the contract you sign. If you have an excellent credit score and reasonable financial backing, as well as a solid, low-risk business plan, this will not be a problem for you at all.
What Can I Do?
If your credit history is shakier, you should still be able to accept credit cards. You may just need to do so using an optional service like an offshore account or a processing with slightly higher discount fees than normal.
At the same time, you want to work on improving both your personal score and building your business' rating with an eye on the future. Personally, you should make sure to maintain a low debt to borrowing capability ratio, and you should take care of all loans and debts in a timely fashion. Late payments and non-payment both hurt your rating.
As a business, minimizing chargebacks is the most important thing you can do to secure yourselves a great reception from merchant service companies. A history showing many sales and no complaints is a solid way to encourage banks to do business with you, and to give you the lowest rates they can. You should also make timely payments on any equipment that you are leasing or financing, as that is another way to build trust. Once you have done all this for about a year or more, you can consider renegotiating your contract or turning to a different type of processing service depending on your needs.
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