E-Commerce Concerns: Are You a High Risk Business?

Sine businesses and industries are more risky than others. If you’re in one these industries, you’re tagged with the label of “high risk” by many credit card processing companies. You’re also tagged as a risk with banks for all sorts of things you need, like loans. That’s why it’s so difficult to get a traditional merchant account through a bank. It’s also difficult to get low fees for transactions, a bank account, lines of equity, and trade accounts. But, don’t worry – be happy. There are many ways around these problems.

What’s A High-Risk Business?

A high-risk businessis one that is not registered with local regulatory agencies, that sell products which are deemed to be “high risk” like gambling products, tobacco, firearms, downloadable software, gaming ticketing, health-related products and services, and of course alcohol.

Sometimes, a business can be considered high-risk if it’s in an environmentally-related industry. For example, a business that is in waste management will find it more difficult to get loans from banks, credit card processing, and other banking services. It will pay higher insurance premiums than other kinds of businesses too.

Getting A Merchant Account

Fortunately, all hope is not lost. The adverse risk market has created some pretty incredible opportunities. A few companies out there will take you own, and help you get a merchant account through something called a “payment processor.”

Payment processors are companies that hold merchant accounts in good standing. They then lease part of the account to you as a merchant. In a sense, you’re not really being approved for a merchant account, but rather a “sub-account.” ?

The processor takes the risk of your transactions, but also imposes rules and requirements on you to reduce their risk, such as transaction limits. They may also impose fees for risky businesses or industries. In this way, they act as a sort of “insurance company” within the credit card processing marketplace.

If you’ve had trouble getting a merchant account in the past, it might be worth your while to get a review by CardPaymentOptions.com, a respected name in card processing. They will be able to tell you what to expect in terms of processing fees and limitations.

Getting A Loan Through Trade Accounts

When you’re first starting out, it’s much easier to get trade lines than it is to get a direct loan from a bank. A trade line is credit with a supplier. The supplier lets you take out a “loan” for products and you pay off this debt over time. This helps build up your credit so that you can purchase more materials on credit and eventually approach banks for loans.

Establishing Business Credit

A DUNS number from Dun and Bradstreet is necessary if you want to establish business credit. The DUNS number is similar to a Social Security Number for businesses (at least, in the context of borrowing and credit-related activities). Getting one is easy. Simply fill out the application with D&B, and you will be assigned a number which you use for all credit-based transactions. Before you know it, your business will have better credit than you.

Chad Hembree is a business person of many years. He likes to help new business owners by posting what has worked for him online. You can read his enlightening articles on a variety of websites and blog sites, too.


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