What Banks Want from You

April 13, 2006

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With credit card fraud topping $200 million each year, banks and other lenders are understandably skittish about commercial credit card accounts. When you go to your lender to open up a credit card account, you'll need to make a full financial disclosure in the same way that you would if you were asking for a loan. (Or even more so: we know of one small business owner who was asked to submit to an FBI check before being granted a merchant account!)

The likelihood of obtaining a merchant account from a bank will depend upon the following factors:

Your type of business. Certain types of businesses are considered higher credit risks than others. For example, a home business or a mail order company will have a more difficult time opening a merchant account than will a company with a traditional storefront.
The length of time in business. If you're just starting out, you'll have more difficulty opening a merchant account than will an established business.
Your general creditworthiness. Banks will want to know whether you've ever declared bankruptcy or if you have any judgments or liens against you. If you do, your chances of getting a credit card account are not good. If you're just starting out, the banks will want to look at your personal credit history.
Your previous merchant account status. Banks will want to know if you've ever had a merchant account before because it's a good indication of your creditworthiness.

What you should do. You should be prepared to submit all of the financial information you can gather about your business, as well as information about your personal credit history. That would include information about how your business is financed, how it is organized, and how you plan to run it.

Also, you should take this opportunity to request a credit report on yourself. You can obtain one by contacting a credit bureau, such as Experian or Dun & Bradstreet. If anything on the report is wrong, notify the credit reporting company in writing, and keep following up until it is changed. It's important that your report be accurate because the bank may be using it to determine whether to let you open a merchant account.