Like any good business owner, when John Greenlee's customers talk, he listens. "We were doing festivals, and customers asked if we took credit cards," says Greenlee, who sells leather handbags and accessories at festivals, expos and home shows. "I started keeping count, and at six different events, [a total of] 25 people asked. That's 25 customers I lost because they didn't have cash, and I'm leery about out-of-state checks."
The solution to his problem seemed simple--establish a merchant credit card account. Companies offering merchant status seemed plentiful, and Greenlee found one whose program sounded good. But when he read the contract, he found some glaring omissions the sales representative had neglected to mention: "I had to sign a four-year contract," he says, "and if I didn't do at least $2,500 a month in [credit card] sales, I would have to pay an additional charge."
So Greenlee approached Pittsburgh-based Mellon Bank, where he had his personal and business accounts. The bank asked for proof of his fictitious business name filing, a copy of his product catalog and his return/refund policy; they also did a credit check. All this presented no problem for Greenlee. There was only one hurdle the Glenside, Pennsylvania, entrepreneur could not overcome--the request for two years of business tax returns.
"I had just started my business [in May 1996] and didn't have these," says Greenlee, who was eventually turned down. The story was the same at another bank he contacted.
Debra Rossi, senior vice president of electronic payment solutions for San Francisco-based Wells Fargo Bank, offers insight on the denial. The first thing a merchant needs to understand about accepting credit cards is that the bank views this as an extension of credit, explains Rossi.
"When we give you the ability to accept credit cards, we are giving you the use of funds before we get them. By the time the money actually arrives in the cardholder's account, it could be another 30 days," says Rossi. There is also the real concern that if a company goes out of business before merchandise is shipped to customers, the bank will have to absorb any losses that might result.