We live in a time where people are shying away from making payments for the goods and services they buy using cash. This has challenged most of the businesses with brick and mortar stores plus those that are based online to introduce electronic forms of payment. Well, introducing such payments might appear to be simple, but this is not the case with some kinds of businesses. Payment processing merchants categorize companies based on risk factors, and if you sell CBD, your business might find it hard to get a payment processing account. But why? Read on and find out more on why it is hard to get an account for your business.
CBD has been legalized in several states all over the country. However, some states still deem it to be illegal and the people living there are not allowed to buy and sell marijuana freely. Most of the bank processors like to deal with businesses that are operating legitimately in the country owing to how the process of accepting payment is. The fact that CBD is not legalized in some parts of the country makes them reluctant to offer accounts to such businesses as it is hard to find a bank that offers its services in a particular state. The banks are either worldwide or nationwide and since they are also based in some areas where CBD is illegal, they may choose not offer you a payment processing account.
If you understand a bit about payment processing accounts, you will know that this restriction does not only apply to businesses dealing with CBD. Most payment processors have a category of companies dubbed to be high risks, and if your firm falls under that category, you will find it hard to get a payment processor. These businesses are deemed to be high risk and the classification is based on type of industry, business size, credit history, online operations, chargeback rations and location of the business among others. Illegal businesses are deemed to be high risk and since banks are obliged to report any form of financial crime happening, they choose not to accept these businesses.
All is not lost as the rules are changing over time and some processors are coming into the market to offer payment processing accounts for these high-risk businesses. A company is considered to be high risk especially if it operates in a risky industry and the probability of financial failure of that business is high. No bank would want to get into trouble with the authorities by offering financial services to this industry and it is just safe to avoid it altogether.
CBD businesses are facing a hard time coping with these regulations since they are forced to sell on a cash-only basis. At this age, offering commodities on a cash-only basis is inconvenient as some people no longer even handle cash. What about stores that sell online? How do they get their customers to pay for the CBD? The other challenge of having cash is the security risk your business is exposed since burglars could easily break into the place and steal all the money.
The states that have legalized have opened the path for payment processors to start considering applications from businesses selling CBD. However, the main challenge falls on the owner of the business to ensure that they get a reliable payment processor as the options are increasing as opposed to a couple of years ago when they were very limited. In their defense, opting to go for a normal payment processor will subject them to strict terms and extremely high rates that may not be healthy for their businesses. In such cases, there is limited provision for one to negotiate for better terms as the banks think they are doing a favor and offer these terms on a take it or leave it basis.
Such hard conditions can tempt some businesspeople to consider tweaking their risk factor to enable them to land an account, but this is risky. Clearing your business name from any marijuana connotations can help to reduce your risk factor, but it is better to come clean from the word go so that the processor can know what they are dealing with. If you paint your business as a clean one and the processor finds out later that you had concealed some information, they could terminate the contract and soil your business reputation, something that will make other processors reluctant to offer you an account again.
When applying for a high-risk account, your processor will ask questions and request for more information than they would do to a normal business but always be transparent even if the information is bad for your application. Keep in mind that when your application is accepted, the processor may put some restrictions on your business activity and always abide by them until the probation period elapses. This is because these processors cannot allow you to deal with huge volumes for the first few months as they evaluate your activity, but after you prove to be credible, they will lift the restrictions and let you transact normally.
It has been mentioned that you need to be truthful with the information you give if you want to apply for a high-risk payment processing account with but there are some things you can do to improve your chances. First, ensure that you have a good processing history prior to opening your account. Most processors will ask for about six months of your processing history and yours should be good. You should also have a decent financial balance since banks like it this way. Your processing history should also be backed up with a decent sales history since banks would like to see that your business is profitable and productive. Lastly, ensure that you do not have many chargebacks in your history as this is a major thing that banks look at in high risk businesses. They are undesirable in payment processing and your business should have the measures in place to help reduce the number of chargebacks.
Finding a payment processing account for your CBD business is hard but not impossible. Nowadays, you will come across several dedicated high-risk account processors, and they can help you set up an account and accept electronic payments.