David talks about the most important things for small businesses to keep in mind when setting up credit card processing. This includes staying away from long term contracts, avoiding cancellation fees, putting your best foot forward for approval, getting lower rates, having automatic rate reductions built into your agreement, and addressing technical concerns so everything works smoothly upon launch.
In the latest episode of our merchant education series we tackle the seemingly simple topic of costs. In addition to exploring the discount rate and interchange costs, we outline and provide some metrics for the actual rate you should be willing to pay for your business.
Why do some businesses get lower credit card processing costs than others? In this video David explores the criteria that cause some businesses to get lower rates than others and techniques that you can use to reduce your processing costs.
If you've ever been confused by the difference between a merchant account, a payment gateway and processor you are not alone. In this discussion we break down the role each of those elements play, and how they affect your overall processing costs.
In order to accept credit card payments a business needs a merchant account. In this article we explain what a merchant account is, how to get one for your business, and the costs involved.
There is a lot of confusion when it comes to pricing in the payments industry. The most important cost of all is the discount rate. Learn what the discount rate is and why it's the most important and significant cost when processing credit card transactions.
Making the wrong choice can be costly when choosing a payment processor. David explores 3 of the most common mistakes so you can avoid them when choosing your credit card processor.
The debit system in Canada is called Interac. It's totally different from Visa or MasterCard so it works in its own unique way when it comes to making purchases online.
If you've not accepted credit cards previously you may wonder how long it takes to get your money. In this video David explores the most popular funding schedules for e-commerce and brick-and-mortar merchants.
How to pick a good credit card processor for your business. David gives advice so you can ask the right questions, avoid mistakes, and figure out which payment processors have the potential to be a good solution for your business.
When you work with a payment processor it becomes a long-term partnership. It requires a deep integration if you're doing e-commerce payments, and will have a long-term cost impact on your business. Outages are problems along the way can cause a major issue. In this video David explains when and how to look for references when searching for a payment processor for your business.
An original credit transaction is where a merchant sends money (gives money) to a cardholder. It's a unique service, but merchants should be very careful when using it.
MCC stands for Merchant Classification Category. Every type of business that accepts Visa or Mastercard has a MCC code associated with their business. David explains why the MCC code used for your business can impact the approval rate for your transactions (the wrong MCC code can result in more declined transactions), as well as the costs that you pay when opening your merchant account.
Certain types of businesses are more difficult to administrate from a payment processing perspective than others. In this video David explains what Visa HBR and Mastercard BRAM fees are, how much they cost, and why they apply to some businesses but not others.
Most credit card processors will ask for a copy of the most recent balance sheet and profit and loss statement when you apply to get a merchant account. David explains why payment processors care about company financials, how it can impact your application, and what you can do if the financials for your company are not as good as you'd like.
How to get a merchant account if you operate a business in the construction industry?
(Slightly edited from video transcript for greater readability)
Key Takeaways
1
Chargeback Risk
Construction is one industry that tends to have more disputes than others and for this reason chargeback risk is high.
If there is a dispute or your company should go out of business the payment processor does not want to be left responsible for reimbursing the customer.
Having a good track record of quality completed jobs can help with this concern.
2
Future Delivery Risk
You can reduce future delivery risk by taking a smaller deposit and taking the payments closer to the date the service is provided.
3
Strong Financials will Enhance Merchant Account Approval
Strong financial stability is crucial when applying for a merchant account in the construction industry.
Reducing the processors risk to loss by being able to cover potential chargebacks and refunds will increase the likelihood of account approval.
Need help with this topic? Or a rate quote?
Whether its questions about this article, or you want to see how we can lower your costs. Don't hesitate to contact us.
Hello, David here at Merchant-Accounts.ca. Today, I have a quick question: How do you get a merchant account if you operate a business in the construction industry? Stay tuned; we'll dig in in one second.
Construction Industry payment processing
If you run a business in the construction industry, it might surprise you that you do have a bit of a higher-risk business in the eyes of the payment processor. There are two reasons for that.
Chargeback Risk
Firstly, construction is one industry that tends to have more disputes than others, and that can be because people's demands can be perhaps unreasonable at times. Also, I don't know if this is a secret, but not every contractor out there does great work. Sometimes people take on a job, and they kind of leave it half-finished. You know, some disputes happen that are just one of the risks associated with your industry. It's no fault of your own as the merchant.
Future Delivery Risk
Secondly, the other problem with construction is that people take payment today for a service that is rendered in the future, which is a specific risk that's studied very significantly. If you're a contractor that does decking, maybe you build patios or porches or something like that, your policy might be to take half of the payment upfront. The remaining balance is upon completion of the job, and you might have a very busy in-demand operation. You might be taking payment four months in advance, or even six months in advance so people are ready for the upcoming summer season. The problem is because you're taking payment today and those services are not being rendered until some point in the future, it raises something called future delivery risk.
Refunds
One of the core and principal protections built into credit card processing is as a cardholder, when you pay for something, you're guaranteed to get it to come hell or high water. You are getting what you paid for, or you will get your money back.
Now, when you get your money back, it has to come from the merchant in this example, this fictitious construction company. But the question is, what happens if that construction company goes out of business and they don't have the money available to give back to the cardholder? Well, it doesn't change the fact that the cardholder has to get their money back. What happens in these cases is it comes from the payment processor's pocket. The payment processor must take the money out of their own. They must finance it themselves and give it back to the cardholder. Now, that is the reason that a lot of construction companies often have rolling reserves or holdbacks on their account and are conceived. It's not high risk, but it's more like moderate risk, and you don't want that. You want all of your payment.
When you process a payment, you want all of your money tomorrow. The way that you do that, there are two ways to do it. The best way that you can do it is just to be a stable, reliable company that's been in business for a long time, and you have money in the bank, and you have financial statements for your company. You can show that you're in a good financial position. You're not going out of business; you're not going anywhere. However, not every construction company or contractor is in that situation. What do you do then? If you're in a situation where you can't rely on your business history and financials, you can try to as much as reasonably possible, minimize your upfront deposit and charge more of the money, much closer to the date of the work beginning or ideally when the work has ended.
Now, I'm trying to be very direct and transparent about this, that that is also an unreasonable thing that you can't completely accommodate. Depending on the job, you might have a lot of material costs. You need to buy supplies, you have staff, you have insurance. There are lots of operating costs. It is reasonable that you need some cash flow. Of course, the hardest time is in the very beginning when the business is young. All I'm trying to say is if you can, to the extent that you can comfortably operate, minimize the amount of money that you're taking way out in advance and maximize the amount of money you're taking very close to the beginning of work or stage payments. It helps reduce the risk. Finally, work with a payment processor that can be flexible and can work with you.
Relationship Matters
In many cases big payment processors are not as good at working with merchants with unique situations or where you need to prove yourself over time or build that relationship at Merchant-Accounts.ca. Just as an example, we love working with contractors, and I think all the things that I've demonstrated in this video, explain that because we get that you need money, you need cash flow, but at the same time, we ask, hey, just understand we don't want to be left holding the bag if everything goes sideways here. That's generally the best advice that I can give you.
Conclusion
In summary, the problem is that contractors sometimes have a bad reputation. This has nothing to do with you, it's just your industry. You separate yourself with your business history. Ideally, you minimize the amount of money you take away in advance. You take payment closer to the date when the service is rendered. Then if you do have a strong business history, absolutely talk about it. Prove it by providing your financials. Do a cover letter about your company where you're explaining your accolades and your history. I don't think I need to go on any further than that. If you have a construction business or any type of business and you might like to get a quote, please do reach out to us at Merchant-Accounts.ca. Thanks for watching and have a nice day there. Bye now.
David talks about the most important things for small businesses to keep in mind when setting up credit card processing. This includes staying away from long term contracts, avoiding cancellation fees, putting your best foot forward for approval, getting lower rates, having automatic rate reductions built into your agreement, and addressing technical concerns so everything works smoothly upon launch.
In the latest episode of our merchant education series we tackle the seemingly simple topic of costs. In addition to exploring the discount rate and interchange costs, we outline and provide some metrics for the actual rate you should be willing to pay for your business.
Why do some businesses get lower credit card processing costs than others? In this video David explores the criteria that cause some businesses to get lower rates than others and techniques that you can use to reduce your processing costs.
If you've ever been confused by the difference between a merchant account, a payment gateway and processor you are not alone. In this discussion we break down the role each of those elements play, and how they affect your overall processing costs.
In order to accept credit card payments a business needs a merchant account. In this article we explain what a merchant account is, how to get one for your business, and the costs involved.
There is a lot of confusion when it comes to pricing in the payments industry. The most important cost of all is the discount rate. Learn what the discount rate is and why it's the most important and significant cost when processing credit card transactions.
Making the wrong choice can be costly when choosing a payment processor. David explores 3 of the most common mistakes so you can avoid them when choosing your credit card processor.
The debit system in Canada is called Interac. It's totally different from Visa or MasterCard so it works in its own unique way when it comes to making purchases online.
If you've not accepted credit cards previously you may wonder how long it takes to get your money. In this video David explores the most popular funding schedules for e-commerce and brick-and-mortar merchants.
How to pick a good credit card processor for your business. David gives advice so you can ask the right questions, avoid mistakes, and figure out which payment processors have the potential to be a good solution for your business.
When you work with a payment processor it becomes a long-term partnership. It requires a deep integration if you're doing e-commerce payments, and will have a long-term cost impact on your business. Outages are problems along the way can cause a major issue. In this video David explains when and how to look for references when searching for a payment processor for your business.
An original credit transaction is where a merchant sends money (gives money) to a cardholder. It's a unique service, but merchants should be very careful when using it.
MCC stands for Merchant Classification Category. Every type of business that accepts Visa or Mastercard has a MCC code associated with their business. David explains why the MCC code used for your business can impact the approval rate for your transactions (the wrong MCC code can result in more declined transactions), as well as the costs that you pay when opening your merchant account.
Certain types of businesses are more difficult to administrate from a payment processing perspective than others. In this video David explains what Visa HBR and Mastercard BRAM fees are, how much they cost, and why they apply to some businesses but not others.
Most credit card processors will ask for a copy of the most recent balance sheet and profit and loss statement when you apply to get a merchant account. David explains why payment processors care about company financials, how it can impact your application, and what you can do if the financials for your company are not as good as you'd like.
Need professional guidance? Contact us for a free one hour consultation.
Can I Help Lower Your Processing Fees?
If you found this content helpful, will you give me the opportunity to quote on your business?
My name is David Goodale, CEO at Merchant Accounts.ca. I launched our business in 2001 and have over 20 years of expertise in the field of online payments. If you have a payments related question or project, and especially if it relates to multi-currency or international e-commerce don't hesitate to contact me. I'm always happy to help with an honest opinion, and enjoy chatting with folks from interesting businesses.
