9 Merchant Account Requirements You Will Need To Process Credit Card Payments
One of the most important factors you should consider when running a business is payment methods. Having a cash-only policy will limit your business and delay your success. Having a flexible form of payment includes accepting credit cards. This way, you will increase your customer base and gain more profits.
However, there is a process you need to follow for you to become a credit card merchant. The underwriting process lets the credit card provider know how risky your business is to them. This article provides a list of the nine most common merchant account requirements you need to process credit card payments.
1. Your Business License
When you are running a business legally, the state or county in which your business is located may provide you with a business license. Every state has different requirements you must meet before being given a business license. Your merchant account provider uses the business license to confirm that your business is legal and approved by the state.
2. Employer Identification Number
The IRS provides you with the employer identification number (EIN). The state uses this number to identify your business and report all your business taxes.
If you do not have the EIN, you can apply for one easily through the IRS website. The process is easy, and you will be issued one immediately. If you are an entrepreneur with no employees, you can use your Social Security Number instead of your EIN.
3. Business Bank Account
Whether you have employees or not, you must provide your business account on your merchant application. The merchant provider will deposit your funds from your credit card translations in this bank account without the processing charges.
Unless you are a sole proprietor, you will need to separate your personal bank account and your business bank account. The business account also needs to be in good condition so avoid low balances and overdrafts.
4. Certificate of Formation
A certificate of formation is simar but different from a business license. If you have even one employee, you have to file legal documents with your state. Like a business license, the certificate of formation ensures your business is officially recognized in your state.
Limited Liability Companies (LLCs) are required to provide Articles of Organization, and corporations provide Articles of Incorporation.
5. Physical Address
You are required to have a physical address per the card association policies. If your business is a brick-and-mortar, the address of your business is what you fill in, but if you are running an online business, you can fill in your home address.
6. Financial Statements
Merchant account providers may require you to provide them with your financial statements, such as tax returns and banking statements. Most providers will ask for financial statements dating back to two years based on the expected processing volume.
You will be asked for your personal financial statements, especially if your business is new. Financial statements help the account providers to look into your financial responsibility and how well you handle cash.
7. Previous Processing Statements
If you have been processing credit cards before, the new merchant account provider may need to see your previous processing data for about the last three to five months.
Your previous processing statement helps the provider to calculate how much money you process monthly and see how often chargebacks occur. These factors help them calculate the risk of working with you.
8. PCI Compliance
All states require every business to follow the Payment Card Industry (PCI) standards and regulations. PCI regulations protect customer card data from data breaches. If you are running an online business, the account providers will need to see you have security measures to protect your clients’ data through website encryptions and SSL certifications.
9. Voided Check
A voided check provides the account provider with your business account information. Details such as your business name and routing number must be visible. If you are a sole proprietor, ensure your name appears on the check.
Although various merchant account providers have different requirements, most are similar. It is crucial for you to gather all these requirements before applying to be a credit card merchant.