In one word. Yes! Most merchants that are applying for a merchant account are not aware of this however. Once they find out their application is pended, or worse yet declined, they of coarse want to know why. The second question asked is, “Why does it matter?”
To answer that, the first thing you have to recognize is that your processor is responsible for every transaction you make for up to 6 months. What that means is that if you make some bad transactions and then go out of business, your credit card processor has to eat the refunds if they cannot get a hold of you. So as you might expect, they want to make sure you are somewhat trustworthy.
Some business types are less risky than others though. If you are a restaurant merchant, credit is not so much of an issue. If you are a contractor in the construction or remodeling fields, you are classified as a higher risk, especially since your transaction sizes are much larger. A larger transaction size can leave the processor responsible for a larger possible refund or charge-back.
So what can you do?
If you have weak credit and are not a high risk merchant, there are a few things you can do…
1. Submit 3 most recent month’s business bank statements. (Note that you will need to have a reasonable balance at the end of each month)
2. Have a strong co-signer.
3. Request a rolling reserve on your transactions.
