In the digital era, starting a business has become more accessible than ever. Whether you’re starting a brick and mortar store or an ecommerce merchant account, the information age has given control back to the entrepreneurs. However, many of the pitfalls of past businesses still exist.
In this article, we’ll take a look at all the things you should remember when starting a business. From small administrative tasks to some of the most critical steps involved in building a successful business. Continue reading below to see some of the most important things to remember when putting up a startup business.
What is an Ecommerce Merchant Account?
A merchant account is a type of business account through a bank or a merchant account service provider that allows a business to accept credit and debit card payments from customers. Banks consider granting a merchant account to be an extension of credit and will evaluate your business as such.
To be eligible for a merchant account, generally your business needs to be operational for at least six months and the personal credit of the business owner may determine whether the processor will approve the business.
Much like a line of credit, a merchant account has limits, rates, and other provisions that govern its use. For the best chances of merchant account approval, it may be advisable to apply with the bank you are already trading with. If necessary, at a later time, you can always change the bank account associated with your merchant account.
Requirements for an Ecommerce Merchant Account
Merchant account requirements may vary slightly from one processor to the next. However, here are the basic requirements you’ll need to meet to apply for an ecommerce merchant account:
- Own a Legal business (i.e., selling goods or services that are not against the law)
- Have a Bank Account for Depositing Funds
- Have an Employer identification number (EIN)
- Obtain a Business License
- Have Record of all Financial Statements
Additionally, if you are considered a high-risk merchant, you may have additional requirements, such as:
- Processing History
- Previous Processing Statements
- Personal Credit Check
- Site Visit
You will be informed of the requirements when applying with an ecommerce merchant account service provider.
Things to Remember When Starting a Business
Obtain Tax ID Number
This is one of the first steps you need to take when setting up your business to receive payments. While you can accept payments without a tax ID number, the company will be under your personal social security number as its sole owner. Getting a tax ID number will also make it easier to sort through income and expenses during tax season.
Obtain a Business License
Unless you are the sole owner of a business operating in individual counties, you probably already have a business license of some kind. You’ll need a business license for reasons other than opening a merchant account, so it’s critical that you obtain one if you don’t have it already. The application process is simple and can be completed at the Secretary of State website.
Set up Business Bank Account
You’ll also need a business bank account before you open a merchant account. Your business bank account will be the default destination for the funds you receive from customers, as well as the location where transaction fees are being debited. Opening a business bank account is a rather quick process and only requires you to have your business license and Employer Identification Number (EIN).
Get PCI Compliance
Before 2008, PCI compliance was considered to just be best practice, but it is now a requirement for all businesses. The PCI Data Security Standard (DDS) is a set of rules and regulations established by credit card companies to ensure that companies safely and securely process payments from their customers.
While you’re not required to obtain PCI compliance prior to opening an ecommerce merchant account, you’ll need to do it soon after, so it’s a good idea to get ahead of it.
Determine How Credit Card Payments Will Work
It’s also important to consider how you want credit card payments to work with your business before setting up an ecommerce merchant account. This will include determining what types of credit cards your business will accept, how you will allow payments to be completed (website, virtual terminal, etc.), and how much of your sales volume will be through credit cards.
You’ll want to know the answers to these questions before determining which service provider you will partner with.
Determine Merchant Account Service Provider
Lastly, you will also want to determine which ecommerce merchant account service provider is best suited for your company’s needs. Below are some points to consider during this process.
There are two common types of transaction fees associated with credit card transactions: flat-rate and percentage fee. Flat-rate fees consist of you being charged for each credit card payment that is processed. Percentage fees are based on the volume of transactions that you process.
It’s critical to understand these fees upfront, so you are not surprised by them in the future.
Processing volume is the amount that a service provider will allow you to charge for credit card sales over a monthly period. If you exceed your allotted processing volume, the provider may impose additional fees or penalties.
Transaction percentages refer to how you accept credit card payments. Service providers need to know how you’re going to process credit card sales to assess the amount of risk associated with each transaction. Some providers may ask for percentages of credit card transactions, while others may ask whether you accept cards in other ways.
The average ticket refers to the dollar amount of the average credit card sale. When applying for a merchant account, you will be asked for this so that your service provider will have a rough estimate of how much money you process during each credit card sale.
Highest Anticipated Ticket
Highest anticipated ticket refers to the highest amount you expect for any single credit card sale. This helps service providers accommodate businesses that have a relatively low average ticket, but occasionally process large transactions.
All that Paperwork and STILL no Progress?
We stated earlier on that your best chances of getting a merchant account would be to apply with a bank you’re already in business with. Things change drastically if you’re a high-risk merchant though, as even the most hardened of bank relationships pale in comparison to the calculated risk of a bank taking your high-risk business as a separate client.
If you’re considering starting a business and need an ecommerce merchant account solution you can rely on, contact High Risk Pay today. We have an over 90% approval rate and have a turnaround time in as quick as 24 hours. With our ecommerce payment processing solutions, we change the way you do business for the better. Don’t wait to take your business to the next level, apply with High Risk Pay today!