Start-Up Merchant Accounts: Where To Start?
Libby James, Co-Founder of Merchant Advice Service, discusses the steps to take and the considerations to make when establishing merchant accounts.
You’ve taken the leap and decided to start your own company, and so the paperwork and decision making begins! At this expensive time, it’s important to consider finance options and of course avoid what can be costly mistakes. This includes choosing the right business loan to sourcing card processing providers.
It can certainly be mind boggling at these first few stages of your business set-up, but we can shed some light on the matter, guiding you through the process of choosing a provider that suits your business now and in the future.
Before you make the rash decision of signing a long-term contract that you may have to pay to get out of in the future, work out what your business truly needs.
Start by understanding what charges occur when you accept card payments from your customers. Every merchant provider will charge a percentage per transaction these will be different for both credit and debit cards, however what are the extra costs? Do they charge authorisation fees? Minimum transaction fees? Fees for contactless payments? When shopping around for merchant account providers, it’s imperative that you compare like-for-like and do not just make your decision based on the percentage fee alone.
Calculate your expected transaction size. Doing so will enable you to find a provider which is most suited to your business. For example, sourcing a favourable provider for a company with expected low volume transactions but of larger size won’t be the same as find a provider for a company who take high volume transactions of lower amounts. One size doesn’t fit all, the correct provider for a car showroom won’t be the same as for a coffee shop. Think long term with this too, although you may be starting small – where do you plan to be in a year’s time?
Well known vs. smaller suppliers
Understandably, new businesses often decide to work with merchant account providers that are well known brands and companies they have heard of i.e Worldpay, Paypal, Barclays. This isn’t always the most cost-effective way of accepting card payments. The overall costs can be high and the contract lengths up to five years. Using an unbiased merchant broker who has access to numerous providers, some of which you will have never heard of before, can help you to find the very best deal available to your business. Often, they will suggest a shorter-term contract while you build up your turnover and a transaction history.
With online businesses booming, searching for a merchant account doesn’t stop at a chip and pin machine. To accept payments online, you will not only require a merchant account but also a payment gateway provider. The payment gateway acts as a safety net to protect your customers card details and prevent them from falling into the wrong hands. Choosing a reputable provider will mean that your company meets compliance standards and that your customers feel confident when placing orders through a new site. The cost of a payment gateway tends to be a small monthly amount. Payment gateway providers can help with searching for a merchant account, however be warned these can be costly – take your time and shop around.
Analyse your service provider annually
Once you are up and running and accepting card payments, it’s important not to let your contract stick. Just like mobile phone contracts, or savings accounts – review your merchant account when it comes to the end of your contract or even before. Experts suggest an annual review, especially if there is no cost to leave your current contract. As turnover of your new company increases over the years your business will become more attractive to perspective merchant account providers, use this to your advantage.
Following these simple tips will ensure you get the most from your merchant account and most importantly save your new business money.