Every so often a merchant account with either poor credit or a recent bankruptcy will contact us to find out if they can still get approved for a merchant account. The short answer is “yes, they can”, but the full answer is a bit more complicated.
It’s important to understand that every bank has its own approval criteria and different views on the risk associated with a merchant that has filed for a bankruptcy. Always remember that what one bank considers high risk, another may be happy to accommodate. It’s one of the reasons why we work with a number of acquiring banks. Credit card processing is not a “one size fits all” industry.
With the understanding that each bankruptcy must be assessed with on a per case basis, we must look into the criteria surrounding each individual bankruptcy. You must first separate the conditions of the online payment gateway bankruptcy. For example, was it because of some type of intentional wrongdoing or shady business practices, or was it because of personal reasons that wouldn’t carry over into operating a business? Has the bankruptcy been discharged, or are there still a laundry list of upset creditors? No matter how you slice it a bankruptcy is not desirable, but there are certainly shades of grey within a bankruptcy that will have a differing impact on approval of the application.
Depending on the conditions of your credit history or bankruptcy (such as how recent the bankruptcy was) there may be certain conditions attached to the approval of your account such as a rolling reserve or processing limit. If you are wondering why a processor would want a rolling reserve and how risk works in the payments business, you can find it being discussed in this blog posting. In many cases the goal is to get through the door and get approval with a mutually agreeable security reserve, and to build your track record and prove yourself by maintaining your account in good standing. If you can do this you can renegotiate any conditions attached to your approval and eventually eliminate them (usually after at least 6 months, possibly a year).