Getting a merchant account: A comprehensive how-to manual for companies

For many organizations, accepting credit cards and electronic payments from clients is a fundamental need. In 2022, consumers utilized cash for only 12% of in-person retail purchases. However, many company owners, particularly those who are just starting out, putting up the required infrastructure to take these payments may be a daunting undertaking.

It may be difficult and time-consuming for company owners to get a merchant account since they have to submit a number of paperwork and go through a rigorous underwriting procedure. The advantages of having merchant account capabilities outweigh these difficulties. By providing more simple payment choices, merchant accounts not only assist companies in improving cash flow and sales, but they may also boost consumer satisfaction.

For many organizations, having access to a merchant account is essential. However, if you prepare ahead of time and carefully consider your alternatives, getting this access doesn't have to be difficult. This brief tutorial will walk you through the process of opening a merchant account so you can do it with confidence and comfort.

What comprises this article?

A merchant account: what is it?

A merchant account is required by whom?

How to open an account with a merchant

Register your company

Obtain a UTR

Create a bank account for your company.

Look into merchant account providers.

Fill out an application.

Offer corroborating records

Await the blessing

Organize the payment processing

Evaluate the system.

Take payments now.

A merchant account: what is it?

A merchant account is a kind of specialized bank account that is used to retain money from client transactions until it is moved to the main business account of the company. It serves as a go-between for the client and the company, and as soon as a transaction is completed, money comes into the merchant account.

Merchant accounts are usually offered by banks and other financial organizations that provide merchant services. Many of these organizations just provide a merchant account; the company must get the other parts from outside suppliers. However, some of these organizations could supply hardware or software for payment gateways.

A merchant account is required by whom?

A merchant account is required for the majority of companies that take electronic payments, such as credit and debit card payments. This covers companies of all sorts, ranging from little home-based enterprises to big conglomerates.

The following are some instances of companies that usually need access to merchant services or a merchant account via their payment-processing provider:

E-commerce companies: In order to handle payments from clients who make purchases via their websites, online merchants need a merchant account.

Restaurants: In order to accept credit and debit card payments from customers who eat in or order takeout, whether such orders are placed in person, online, or via mobile applications, restaurants and other food-service enterprises must have a merchant account.

Healthcare providers: In order to accept payments from clients who pay with a debit or credit card, healthcare providers—such as physicians and dentists—need a merchant account.

Retail stores: In order to receive payments from clients who use credit or debit cards to make in-store purchases, retail stores must have a merchant account.

Service-based companies: In order to receive payments from customers who pay with credit or debit cards for services, service-based companies—like consulting firms—need a merchant account.

Non-profit organizations: In order to receive payments from supporters using credit or debit cards, whether online or in person, non-profit organizations must have a merchant account.

It's crucial to carefully consider all of your choices and choose the best merchant account solution for your company since the criteria for creating a merchant account might change based on the provider and the kind of business.

How to open an account with a merchant

Prior to opening a merchant account, you must establish a few key components of your company. Here's a summary of how to set up your company, choose the best merchant account, and create a merchant account:

1. Register your company

Before creating a merchant account, businesses that want to operate in the US must register with the appropriate federal agencies. Getting any required licenses, permits, and tax IDs is part of this. Depending on a number of variables, such as your region and kind of company, the particular criteria for establishing your business may change.

2. Obtain a UTR

Additionally, you must get an IRS Unique Taxpayer Reference (UTR). Similar to a business's Social Security number, a UTR is a special identification number granted to your company. It serves a number of banking and tax functions.

3. Open a bank account for your company.

Standard business bank accounts are not the same as merchant accounts. Standard corporate bank accounts may be used for a wider range of banking and financial operations, while merchant accounts are only intended to receive cash from client transactions. To accept payments from your merchant account, you must to create a business bank account. Simply opening a merchant account is not sufficient. Pick a bank that provides the services you need, such affordable rates, user-friendly internet banking, and attentive customer care.

4. Examine suppliers of merchant accounts.

It's crucial to choose the merchant account provider wisely since not all of them are created equal. The following elements should be taken into consideration while looking into and selecting a merchant-account provider:

Charges

Fees are levied by merchant account providers on a per-transaction basis as well as as a percentage of the transaction value. A few suppliers could additionally impose extra costs for other services like setup and ongoing maintenance. To determine the overall cost of utilizing the service, it's critical to thoroughly go over each provider's pricing schedule.

Time spent processing

Faster processing times are provided by some merchant account providers than by others. Choosing a service that can process payments rapidly is crucial if your company depends on short turnaround times, such as an e-commerce store that has to ship items swiftly.

Client assistance

Good customer service is essential for answering any queries or problems pertaining to your merchant account. Choose a company that provides phone, email, and chat assistance in addition to other means of communication with customer service.

Features of security

Security elements are important to take into account since fraud and cyberattacks are becoming more and more dangerous. Choose a merchant account provider that has robust security features like fraud detection and encryption.

Integration with your company

Think about how simple it will be to integrate the payment processing software with your current systems, such your POS or website. The setup procedure will go more quickly and smoothly the simpler it is to integrate.

Credibility

Before registering, it's crucial to look into the reputation of the merchant account provider. See whether other companies have had good experiences with the service by reading their reviews.

You may reduce the number of options you have and choose a merchant account provider that best suits the particular requirements of your company by taking these considerations into account.

Companies are choosing more and more to use merchant services or payment processing companies like Stripe to get the features of a merchant account without ever opening one. Companies that receive payments from customers with Stripe have all the features of a standard merchant account without having to search for, investigate, apply for, and connect with several merchant accounts. Read this article to learn more about how Stripe helps companies avoid creating their own merchant accounts.

5. Finish the application

Usually, the merchant account application form would request the following details about your company:

Name of the company

Tax ID number (UTR) of the company

Details about how to get in touch

Certain merchant-account providers may need more details, such your company structure, industry, expected monthly processing volume, and processing history. You could also be asked to fill out an application with information on the kinds of goods or services you provide and the payments you want to take. If you will be processing transactions in person, online, or both, you could be asked to specify.

You can be required to provide personal information about yourself as the company owner in addition to the standard business data, such as:

Name

Your residential address

The number on your national insurance card

This is because, as part of the underwriting procedure, the merchant-account provider could do a credit check on you.

It's crucial to fill out the application accurately and completely. Giving false or lacking information might cause the approval process to drag on and perhaps lead to the rejection of your application. It's also crucial to thoroughly study the terms and conditions and comprehend all of the account expenses, such as setup, transaction, and monthly maintenance costs.

6. Offer corroborating records

The underwriting procedure and document submission are crucial phases in the merchant account establishing process since they confirm the existence and reliability of your company. This is what you should anticipate happening:

submitting the necessary paperwork

Once you have finished the merchant account application, you will need to provide the provider the necessary supporting paperwork. Depending on the provider and the kind of your company, other papers may be needed; nonetheless, tax returns, bank statements, and business registration paperwork are usually needed. Make sure the papers you provide are full and include up-to-date, factual information.

The underwriting procedure

The provider will start underwriting, or assessing the risk connected with your company, as soon as they receive your application and any supporting materials. Making ensuring you are a reputable and genuine company is the aim. Depending on the supplier and how complex or risky your company may be, underwriting might take a few days to a few weeks.

As the company owner, you may be subject to a credit check by the provider throughout the underwriting process. To evaluate the likelihood of fraud or chargebacks, they could also go into your processing history, sales volume, and other details. The supplier could potentially get in touch with you to request further details or clarification.

The underwriting procedure assists in defending against fraud and other hazards for both you and the supplier. It's crucial to be patient and provide the physician any further information or supporting evidence they may need, even if it might take some time.

7. Await confirmation

You will have to wait for the provider to examine and authorize your merchant account once you have submitted your application and supporting documents. Depending on a number of variables, such as the provider, the nature of the company, and the thoroughness of the application and supporting documents, this procedure may take several days to several weeks. Businesses with a low-risk profile and strong credit might benefit from speedy approval offered by some providers.

A few things that might cause the approval process to drag out are:

Inaccurate or lacking information on the application

Inconsistencies in the corroborating documentation

An elevated risk profile for the enterprise Requests from providers for further details or supporting documents

In order to determine the likelihood of fraud or chargebacks, providers may additionally examine your processing history, sales volume, and other variables. The licensing procedure may take longer if your company operates in a high-risk sector like adult entertainment or online gambling because of the heightened scrutiny.

It's critical to provide accurate and comprehensive information on the application and to reply quickly to requests for more information or supporting paperwork in order to facilitate a seamless approval process. You can expedite the approval process and have your merchant account up and running as soon as possible by being proactive and responsive.

8. Configure the payment gateway

Following approval of your merchant account, you must arrange payment processing with the supplier. Depending on the payment channels you're utilizing and whether you're setting up payment processing for your company exclusively or allowing payments for users on your platform, you'll need different tools and services. This phase usually entails connecting your website or point-of-sale system with payment processing software, at the very least.

9. Evaluate the setup

Before you begin utilizing the payment-processing system to take client payments, test it to make sure everything is working as it should and to identify any issues. Start here to find out more about testing your Stripe integration.

10. Take payments online.

You are able to begin taking payments from your clients as soon as the system has been verified and tested.