When new businesses open, they face an immediate hurdle in getting payment processing and merchant services accounts. They need to collect payments to establish themselves, but too often banks want them established first. For entrepreneurs in certain industries, this becomes even more difficult. This creates a niche where not only you can serve people who need you, but you can also generate strong profits. Serving and managing high-risk accounts can help deliver tremendous profit margins for you as a merchant accounts reseller.
Risk Factors for Accounts
The first key for you is to understand what makes an account high risk. Large financial institutions look to factors like how long a business has been in operation, how much cash they have on hand, and the credit of the owners. Beyond this, they consider certain businesses to be at a higher risk of default, including the following.
- Travel agencies
- Online firearms
- Nutritional supplements
They do this based on experience. Some of these businesses have proven more likely to have chargebacks or face government scrutiny, and the big banks prefer to play it safe. This gives them a lower risk, but smaller profits as well.
By working with higher risk businesses, you give entrepreneurs opportunity. When you do so, you also charge higher fees for payment processing and generate higher revenue and commissions as a reseller. If you balance your risk well, you stand to gain a great deal.
Vet Your Merchant Accounts
Fortunately, a more flexible merchant services provider can take on clients that the larger banks might reject out of hand. The key is to carefully vet the business on its own merits, and then take steps to mitigate the risk present. Often one of these high-risk businesses comes with significant capital on hand, a strong credit history, or other positives that balance out the risk factors. Take the time to understand the full scope of what the business owner brings to the table. Where a large financial institution may dismiss an application based on a formula, you can evaluate it more thoroughly and identify opportunities for your own revenue growth.
This does require you to balance the risks. A high-risk merchant services provider will collect higher fees to help protect itself against the client's business failing. You can also collect the fees more frequently. Because the merchant services account is essentially a line of credit, payments that come monthly, fees transmitted at the point of sale, and other techniques can help reduce the risk you and the merchant services provider face.
If you work with the right provider, you can view potential clients as individuals rather than as a series of checkboxes on an application. You will help a business get a foothold, but you will also give a jolt to your own bottom line. Approach carefully and thoughtfully, and find your path to higher profits.