Charging Ahead

When you go to a bank to open a merchant card account, there are some basic items you should be prepared to present, says Steven Citarella, vice president of credit policy for First Data Merchant Services Corp., an independent credit processing service in Melville, New York, which has formed alliances with 11 major banks.

"While requirements vary from bank to bank, in general a business does not have to be a minimum size [in terms of sales]. The longevity requirement varies from bank to bank: Some require nothing, others as much as three years," says Citarella.

What you will need in all cases is to provide bank and trade references, estimate what kind of credit card or debit card volume you expect to have, and what you think the average transaction size will be. Some banks also require financial statements.

Rossi says the bank's goal is to find out if your business is profitable and if it will be around for a long time to come. "We approve a lot of start-up businesses, and, in those cases, we rely on the personal financial picture of the business principals," says Rossi. "We look at tax returns and where they got the money to start. We'll also look to see if you're a customer of Wells Fargo and look at your relationship with Wells."

Wells Fargo evaluates a business's product or service to see if there might be the potential for a lot of returns or customer disputes. Other factors that will strengthen your package in a bank's eyes, continues Rossi, include demonstrating your longevity in the industry, presenting your marketing plan to show who your customers are and how you will reach and sell to them, and giving your Internet address, if you have one, so officials can check out your site.

The approval process can be a major hurdle for businesses that banks consider risky. According to Citarella and Rossi, these include companies where a high percentage of business is done by phone or mail, as well as industries where there is a delay between the time merchandise is paid for and received by the consumer.

While being considered a risky business is a key reason a bank may deny your merchant card account request, the most common reason for denial is poor credit.

Rossi says Wells Fargo has established a procedure to enable otherwise qualified high-risk entrepreneurs to obtain credit card acceptance privileges. "We approve you [provided you put up] security such as a certificate of deposit, which you keep at the bank for one year."

This article was originally published in the April 1997 print edition of Entrepreneur with the headline: Charging Ahead.