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Small Business Merchant Accounts


If you are reading this article you’re probably considering selling products online. The www means your open for business 24/7 without the extra overhead and exposes you to a global market. If done correctly internet ventures are not just viable but highly profitable.

Before you start building your website you need to think about how your customers are going to pay you.

Accepting credit cards is the number one method of payment and
can be done in different ways. The first decision you need to make is whether you are going to open a merchant account or use a third party.

Opening a merchant account facility is done through a bank. The requirements vary from bank to bank but you will be asked for basic information about yourself, your business and the types of sales transactions you will be complete. This information is used to determine the risk your business activity poses to the bank and the pricing structure you will be offered.

High risk merchant accounts include adult natured, gambling, travel, voip and pharmacutical sites. These sites are targeted by fraudsters and subsequetly have a high number of disputes. If you are planning to open one of these sites or something similar forget about approaching your bank!

In addition, depending on the legal structure of your business, you may be required to submit to a credit check. As a rule, if you are a sole trader or partnership a credit check will be done on you as you are personally liable for any debt incurred. If you have incorporated your business solvency checks will be completed. Bad debts are bad debts. If you can not manage your own finances banks will not allow you to open a merchant account with them.

Using a third party merchant allows you to operate one of the businesses above. It also allows you some flexibility in regards to payment options, reduces your start up development costs and my favourite, allows you to start trading quickly.

The flipside is that funds can be difficult to withdraw. Most banks settle overnight week days so sales completed Monday – Friday appear as a deposit to your nominated bank account the following day. This reduces the amount of capital you require as funds can be put back into stock.

As customers can dispute charges on their credit card statement and you are of unknown quality, third party merchants usually hold funds for a period of 60 days before releasing them to you. This is generally the maximum period scheme providers such as Visa and MasterCard allow transactions to be challenged by a customer. When this period expires you can withdraw funds but you need to be able to operate without those funds for about two months.

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