The Fastest Way to Get Approved for a Merchant Account – What Underwriters Look For

Ever feel like your merchant account application disappeared into a black hole? On today’s episode of The Payment Guy, Frank pulls back the curtain on what’s really going on behind the scenes during underwriting. What are banks actually looking for, and how can you position your business to get approved faster with less friction?

In this episode, these questions and topics will be covered:

• 01:07 - Why underwriters assess risk in the first place. 
• 02:08 - An overview of the must-haves for legitimacy and what mistakes get applications rejected.
• 6:09 - What to prepare for your merchant account application, including the financial proof underwriters expect. 
• 10:40 - Pro tips to speed up approval.

Need a hand getting your merchant account approved? Head over to paydiverse.com or drop us a line at support@paydiverse.com. We’ve done this for years and we know how to make it easy. Don’t forget to subscribe to The Payment Guy for more insights on making smarter payment decisions that fuel your business growth.

Connect with PayDiverse:
Instagram: https://www.instagram.com/paydiverse
Website: http://www.paydiverse.com
LinkedIn: https://www.linkedin.com/in/franksena

Transcript

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Hey, welcome to The Payments Guy, your ultimate guide to demystifying the confusing world of merchant payments. I'm Frank Senna, your host, a merchant payment specialist with nearly a decade of experience. In each episode, we'll break down the toughest challenges in the payment space so you can be better informed when navigating payments for your own business. From minimizing the impact of chargebacks, avoiding funding issues, and ensuring you're never stuck without the ability to process payments, we'll help you make smarter decisions and grow your business. Let's get started. A decline for a merchant account can feel like sending documents into a black hole. You wait and wait and then get a random request or a decline with no explanation. Today, we're pulling back the curtain on what underwriters are actually looking for and how to get your application approved faster. Many business owners are surprised when their application gets delayed or declined. Underwriting isn't some random process. There are clear things that banks are looking for to assess risk. If you know what underwriters need, you can save time, avoid frustration, and improve your odds of approval. Merchant accounts let you accept credit card payments, but they come with risk for the acquiring bank or the merchant's bank. Just like a lender reviews your credit before issuing a loan, merchant account providers need to assess your risk before approving you. If a merchant goes under, commits fraud, or racks up chargebacks, Their bank is on the hook. Underwriters jobs are to evaluate whether your business is safe to take on, financially stable, a legitimate business, and compliant. So underwriters are looking to ensure that your business is legit, meaning it's not a fake business. They're not working with someone with a stolen identity. So they wanna make sure that the business name is registered with the government, There's a tax ID or an EIN and that the contact information that's listed on your website and on your documents is accurate. A functional website that reflects the services or products listed on the application is also a pivotal and important part of the underwriting process. If your website is under construction, don't bother trying to get a merchant account. The underwriters need to review that final functional website in order to determine whether or not they want to get into business with a merchant. So make sure your website is working and that it actually reflects the information that you're putting on the merchant account application. That means the legal business name should match what's on your articles of incorporation or your other legal docs, that the DBA name or the doing business as name also reflects what's on the website and what's on your merchant account application. application. And the contact information should also reflect what's on the application as well as what's on the website. So the customer service number, for example, that's on the website should be the same as what's on the merchant account application. Next thing underwriters are going to be checking for is financial stability of the business or the owner of the business. So you're always going to be required to provide three months of recent bank statements. So right Right now we're in the month of April, so if you were to apply for a merchant account, I would need your January, February, and March business bank statements. If your business is new and you don't have three months of statements available, you can provide personal statements for the owner who's listed on the application. That's totally fine. The goal here is for the underwriters to ensure that they're going into business with someone who can pay their bills. I know seems crazy, right? But they want to work with a merchant who's not going to mismanage their business. They want to make sure that you know what you're doing as a merchant. So if your bank statements have no money in them or they have really low balances or negative balances, that's not going to help set you up for success. So something that I've seen merchants provide are copies of their investment accounts, their retirement accounts. any other businesses that they might own that they can connect through paperwork. These are all going to be acceptable for the underwriter to review. They want to, again, ensure that if you get a bunch of chargebacks, you're going to be able to pay your bills. Next thing that the underwriter is looking at is your business model. They want to understand what are you collecting payment for and what kind of billing model are you you're using. Billing model refers to if you're collecting money for a subscription, you're offering a service that is a subscription service, which is a passive billing model because each month you are charging that credit card even though the cardholder is not giving you their credit card each month. So the underwriter wants to clearly understand what are you collecting payment for and what is that cardholder getting in return for giving you money. They want to understand the billing practices. Is it a one-time purchase? Is there a subscription or a trial? How frequently are you re-billing that cardholder for the services that you're offering? What's the shipping timelines? All of these things are factors that help determine how risky it will be for this merchant bank to go into business with this merchant. So it's really important that you are transparent and clear and providing all this information upfront. Just a little plug for myself. This is where working with a payments consultant can be really helpful because we know and can predict what kinds of questions the merchant banks are going to ask. And we can make sure that we have all this information prepared ahead of time, which ensures a smooth underwriting process and a quick approval. One other thing to mention about the business model is you should clearly have listed your refund and return policy. That should be in the fine print. It should be easy to understand and read, and it should be listed there on that website. Some things that will be a red flag for risk will definitely be if you provide a processing history that has high chargebacks on it. If it has a large number of chargebacks or a large dollar amount for chargebacks, that's a red flag that you're doing something wrong, that your customers are now calling a asking for refunds. So if you have poor reviews on the internet, excessive refunds on your processing history, or you're on the match list, those are all going to be red flags for the underwriters. Another thing too is inconsistent or vague business information. Sometimes we see underwriters who will decline an application because they think that the merchant has manipulated the paperwork that they're providing. Obviously that is is a huge red flag for anyone, but it should be pretty clear. Download your bank statements from your bank and provide them as you got them. You should not be manipulating any paperwork. And you want to ensure that all the information is consistent on the application with your legal business paperwork and with your website. So what do you need before you apply for a merchant account? Here's what we recommend that you kind of gather and have ready before you apply for a merchant account. So make sure that the business entity is registered with the state and provide documentation showing that. Make sure that your website is fully functional and that all the information on the website reflects what you wrote on the merchant account application. You need to provide three months of bank statements whether if your business is established it should be business bank statements for your entity. And if it's a new business, you can provide personal statements. Remember that you want to show a strong balance on those bank statements. You want to show the bank that you have money to operate your business successfully. If you have processing history, you definitely need to provide that. That's actually one of the biggest things that the bank is going to look at when determining whether or not they want to work with you. The processing history is the best way for an to determine how your processing is going to work if they give you a merchant account. So if you have a lot of chargebacks, that's going to be a problem. And the underwriter wants to see that. So another thing to note is if your business bank statements show deposits from a merchant processor or debits from a merchant processor, they want to see three months of history for that processor. So you You got to cough it up, you got to be transparent, and you got to show them everything that you've got. You want to make sure that your products and services and your billing model are all very easy to understand. It should be clear and it should not require extra explanation. Provide this information upfront. You can provide a little blurb explaining your billing model and your business model. Just make it easy for the underwriters to do their job. That's going to really grease the wheels to getting an approval. You want to ensure that your return and refund policy is clearly listed on your website. You want to ensure that there are at least two ways that customers can get in touch with you listed on your website, and you want to make sure you're not on the match list. Of course, that's going to be determined during the underwriting process for sure. Here are some tips to to help you get your application approved much faster and getting through that underwriting process successfully. I always recommend, especially for merchants who are just starting up, that you provide a one-page business summary that explains to the underwriters your ownership background, the details of the product or service that you're collecting payment for, the billing model that you're using, and where you're getting your funds from to run the business All of this information is something that an underwriter might be interested in learning, and if you can provide this information up front, it will make the entire process so much easier and faster to get through. This is especially helpful for startups, but also if you have a unique business model that needs to be explained thoroughly, or maybe you're utilizing some new technology like artificial intelligence that underwriters might not have a full grasp of, this would be a great opportunity to provide that one-page summary and give all that information up front. The idea is you want to anticipate the questions that the underwriters are asking and make it as easy as possible for them to understand what your business does, who your customers are, how you're collecting payment, all of that information. So underwriters love when we submit a clean, complete application No missing documents, no fields that you forgot to fill out. Everything is quite tedious, but when you work with a payments consultant like my business, PayDiverse, we help ensure that all this information is gathered up front, which really helps to get a fluid underwriting process and get through that approval mechanism at the end. You definitely want to double check that your website and your merchant application match. Again, the information on the website like the name of the business, the contact information. It should reflect what you've written on that merchant account application. So sometimes merchants need to update their website or they need to update their merchant account application. And be proactive and be transparent. If something might raise questions like you have a unique business model or there's been weird transaction history or revenue spikes on your processing history, share the background of that and the context with the underwriters because they're going to want to know that information. And the more information that you provide, the better the chances of getting that merchant account application approved. So some things that might slow down the underwriting process or even result in a termination include some missing documents that were not provided upfront or delays in responding to the bank's request. Oftentimes, we will provide a full package to the merchant bank. They review all of the supporting documents that you provided, which includes your bank statements, your articles of incorporation, a void check or bank letter, any processing history that you might have, and a photo ID. Those are kind of the minimum documents required. We provide all of that along with the signed merchant application to the underwriters. They will typically review it within a day or two. and then they'll come back and they'll ask questions or they may request additional documentation. They might want to see additional financials. They might want to see the registration of your website. They might want to see some vendor agreements that you might have. So there's lots of things that they could ask for. And merchants might take weeks to provide this information because, you know, they're busy running their businesses, but it really slows down the application process. So we always encourage merchants have all of your files organized and in one spot and be responsive. If you really want that merchant account, we'll help you get it, but we need you to participate in the process. Another thing that will slow down the application or the approval process is if there's conflicting information on your application, your documents, and your website. Part of the underwriting process is that underwriter is going to review your website thoroughly. They're going to read all the terms and conditions and the fine print, they want to make sure that everything is legitimate. A common issue that I see with merchants is when they build their website, it comes with that gibberish text that built into the website template. Sometimes merchants forget to remove that. Obviously, you can't have that on your website if you're going to be a real legitimate business. So double check all the details and make sure that your website is finished and finalized and you're not making changes to it during the underwriting process. That really annoys the underwriters because they're basically chasing a moving target. They have to make sure your website is compliant. So make sure your website is completed and you're not making changes to it while that application is in underwriting. Make sure that you don't have any vague language about what your business does or how you build customers. Sometimes we'll see this too. Merchants will apply and they just say something like business services. Like, sorry, that's not specific enough. What exactly are you collecting payments for? And what are your customers getting in return for paying you? And keep an eye out for any red flags. If your processing history has a lot of chargebacks, that's going to be a red flag. If your bank statements have a negative bank balance at the end of the month, that's a red flag, obviously. Here's a couple things that you can do to help ensure success and fast approval when you are submitting a merchant account application to be underwritten. Treat the application process like you're applying for a loan. You want to be thorough, you want to be accurate, you want to be clear and transparent. Make sure your website, your documents, and the merchant application all align and all the information is consistent across all of those things. Be proactive about communicating anything that might be different or weird about your business. Address it upfront before the underwriter asks. Because they're underwriters, they're gonna ask. And work with a consultant to guide you to the right banks who understand the risk associated with your business and in the right order as well. There are some banks that are really sensitive to the number of recent credit pulls that a merchant has had. So if a merchant has submitted a bunch of merchant account applications already, some banks will take note of that and they will decline the merchant right away. signal of risk for the merchant bank and they say we don't want to get into business with this merchant but working with the payments consultant who understands this and can guide you in which banks to apply to first can be really really helpful if you want help getting your merchant account approved faster visit pay diverse comm or email us at support at pay diverse comm for expert guidance we'd love to help you guys out we've been doing this for years and we know what we're doing