What You Need To Know About High-Risk Merchant Accounts With Instant Approval

Getting swift approval for an individual merchant account is uncommon, particularly for high-risk merchants. Accordingly, there are a number of merchant services providers promising high-risk merchant account instant approvals. You may well be tempted by claims of “instant approval” — particularly if your business is considered high-risk.

Nobody enjoys waiting to be cleared for a key business service, especially one so closely linked to sales as a merchant account. While third-party processors such as Square, Stripe, and PayPal let businesses start processing almost immediately, all three companies explicitly will not serve most high-risk industries.

This post explains what “instant approval” really means and why it’s a bad idea, no matter how desperate you are to get a merchant account.

Can You Get A High-Risk Merchant Account With Instant Approval?

While some companies offer expedited review processes, you can’t really get “instant approval” for a high-risk merchant account. Despite those “instant approval merchant account with no credit check” ads that you’ll occasionally see, it always takes longer to obtain final approval for a high-risk merchant account than it does for a low-risk business.

The Truth About High-Risk Merchant Accounts & Instant Approvals

While traditional low-risk businesses can get approved within a day or two, high-risk merchant accounts require a minimum of three to five business days to be approved. The process can take as long as three to five weeks.

Why so long? Approving a high-risk business requires more extensive investigation into the credit history of both the business and the owner, as well as the nature of the business.

Credit Checks

Poor personal credit on the part of the owner is one of several reasons why a business might be classified as high-risk in the first place. You’ll have to submit far more documentation and wait far longer for this process to be completed than a low-risk business would.

What Instant Approval Actually Means For High-Risk Merchants

With providers advertising “instant credit card processing approval,” there’s usually some fine print specifying that approval takes 24-48 hours — faster than normal but not “instant.”

These providers aren’t telling you that merchant account approval is a two-step process. First, you must be approved by your fast-approval merchant account provider. Second, you must be approved by the acquiring bank or back-end processor that underwrites your account and processes your transactions. This process takes anywhere from three days to five weeks.

3 Warning Signs For High-Risk Instant Approval Merchant Accounts

So what separates a high-risk merchant account provider with an overzealous advertising campaign from a predatory service? Here are some warning signs:

1. Look Out For Long-Term Contracts: Providers offering “same-day merchant account approval” sometimes take shortcuts with the process so that they can get you on the hook for that long-term contract and usually a hefty early termination fee (ETF) as well.
2. Allowing You To Start Processing Before You’re Fully Approved: If the processor approves you prematurely and you start processing before the back-end processor or bank has approved you, you take on risk. Your account may be frozen or even closed altogether, which can get you placed on the Terminated Merchant File (TMF, also known as the MATCH List), possibly preventing you from getting approved for any merchant account for up to five years.
3. Hidden Fees: The sort of instant approval merchant account that advertises to high-risk businesses is also likely to promote “no setup fees.” However, merchant account providers have other ways to get money out of you. While there may be no literal “setup fee,” you’ll likely be charged other fees to make up the difference.

Why Credit Scores Matter To Merchant Account Approval

A merchant account with instant approval can be elusive if you have bad credit, even if your business wouldn’t otherwise be considered high risk. Having a credit score under 580 can be a similarly complicating factor in your quest for a merchant account. Merchant account providers perform a credit check on those that apply for a merchant account, and applicants with poor personal credit may well be turned down.

Those with poor credit who find a provider that accepts them will often have to sign a longer-term contract (often with an ETF) than they otherwise would. They also face higher processing fees. They may have to deal with a reserve fund as well.

Can You Get A Merchant Account With Instant Approval & No Credit Check?

As we’ve established, there is no such thing as instant approval for a bad credit merchant account. This is definitely the case if you’re trying to avoid undergoing a credit check. However, with third-party processors (such as Stripe and PayPal), approval should come within a day or two, and you won’t undergo a credit check.

If you have poor credit, a third-party processor is your quickest route to processing payments; though, technically, you don’t get your own merchant account.

Can You Get A Bad Credit Merchant Account With Instant Approval?

If you have bad credit and are seeking a merchant account, several providers will accept your business. These bad credit merchant accounts do not offer instant merchant account approval, but they deal with credit-challenged applicants regularly, so your approval process shouldn’t be too long or painful.

For an informative guide to getting a merchant account with poor personal credit, read our post on how to get a merchant account with bad credit. The article points you toward several high-risk processors that cater to merchants with bad credit scores. Don’t worry — we’ve vetted these processors for quality!

4 Ways To Improve Your Chances Of A Guaranteed Merchant Account Approval

While the approval process is unavoidably a lengthy one, there are steps you can take as a merchant to speed things along and increase your chances for a guaranteed merchant account approval. The following actions serve to avoid the kinds of problems that might lead to delays in getting your account approved:

• Work With A Reputable High-Risk Specialist: The signup process can be sped up by ensuring there is a good chance of approval beforehand. That means finding a partner with a proven track record and experience in your industry. High-risk specialists such as Durango Merchant Services will help ensure that your paperwork is in order and can also work with a network of acquiring banks and processors to find one that will approve your business.
• Be Completely Honest About Your Business & History: Are you selling medical marijuana (in a jurisdiction where it’s legal)? Do you have a personal bankruptcy on your record? Have you previously had a merchant account shut down by your provider? High-risk merchants often feel tempted to misrepresent inconvenient facts. Please don’t do it! It will lead to you getting turned down for an account — or having your account closed immediately once the processor discovers your dishonesty. Be honest about everything, and you may still get approved for an account.
• Have An Informative Website: If you’re a merchant with a website, having all your relevant policies disclosed publicly on your website for customers to review can help reassure processors of your legitimacy.
• Have Your Paperwork In Order: You’ll need to provide far more information when applying for a merchant account as a high-risk business owner. If you present all of this information with your initial application, it will save a significant amount of time during the approval process. We recommend that you scan all required documents as PDF files so that you can simply email everything you need to your provider as part of your application. See below for a discussion of specific documentation requirements.

What You Need To Prepare For Your High-Risk Merchant Account Application

While specific requirements vary from provider to provider, here’s a generic list of the most commonly requested information:

• Completed merchant account application (from your merchant account provider)
• Résumé or CV of the business owner
• Photo ID or passport
• Business plan
• Personal utility bill (used to verify your address)
• Processing statements for at least the last three months (if you’re switching providers)
• Copies of supplier’s agreements (for retail merchants)
• Copies of your personal banking statements (usually for the last three months)
• Personal reference letter from your bank
• Copies of your business bank account statements (usually for the last three months)
• Articles of Incorporation (or sole proprietorship documentation)
• Articles of Association (if applicable)
• Screenshot of your business website’s home page (if applicable)

How To Spot A Trustworthy Merchant Account Provider

Credit card processing isn’t an industry known for its transparency. While some companies are trying to change this, many still offer little to no information about the costs of their services upfront.

It’s even more difficult to evaluate high-risk merchant account providers because the nature of their business means they may not know in advance what your rates will be. They usually have to shop your profile around to find a bank willing to take you on.

Nevertheless, here are some green flags to look out for:

• Positive Reviews: Look for both professional and user reviews of the company. Does it have many complaints?
• Transparent Website Or Merchant Agreement: Even if the processor can’t give you all the information, it should be able to tell you if you’ll need to have a contract, how long it will be, and what setup fees you’ll have to pay if any.
• In-House Sales Staff: This one may be a surprise, but generally speaking, providers that farm out their sales to independent contracts or teams tend to have more aggressive and less knowledgeable sales teams. You want them to be able to answer your questions correctly.
• No Tiered Pricing: Tiered pricing is our least favorite transaction model because it tends to hide the costs of the service. We prefer interchange-plus pricing, subscription pricing, or even flat-rate pricing (for low-volume businesses). Unfortunately, you may not be able to avoid tiered pricing as a high-risk merchant, at least not initially. It doesn’t hurt to ask, though.
• Referred To By Reputable Low-Risk Providers: It can be hard to evaluate high-risk providers, but the good ones tend to get referrals from highly-rated low-risk providers that couldn’t serve the applicant.

The Bottom Line: Beware Promises Of Instant Approval For High-Risk Merchant Accounts

If you’re a high-risk merchant (and even if you’re not), it’s not simple or easy to get approval for a merchant account. If you get turned down a few times, you might feel compelled to sign up with any provider that will take you. Also, the inevitable delays in getting your account approved can make the possibility of “instant approval” seem very tempting.

Resist that temptation. Online merchant account instant approval isn’t what it appears to be, and it can set you up for serious problems down the road. Do a Google search for “high-risk merchant account,” and you’ll find numerous ads from predatory processors looking to cash in on your desperation.

Fortunately, it doesn’t have to be this way. There are reputable providers specializing in working with the high-risk community that will help you get your documentation squared away so that you can be approved by one of their partner processors. We’ve found Durango Merchant Services and Easy Pay Direct to be among the very best of these providers. They both have strong track records of providing high-quality service at reasonable prices. Check out our post on the best high-risk merchant account providers for additional recommendations.

For more information on doing business as a high-risk merchant and merchant accounts in general, check out the following resources!

• Want To Accept Credit Card Payments Instantly? Here’s What You Need To Know First
• Which Businesses & Industries Are Considered High-Risk? (& What It Means If You’re On The List)