Merchant Accounts for 'High Risk'(!) Companies

Sam_Bee

Well, I find myself in the absurd situation of being bracketed with gambling sites, pornographers and fraudsters.

My own business bank (HSBC) thinks that my business is so great, on one hand they have given us a hefty business loan , but on the other they won't give us a merchant account to accept credit card payments.

In fact, neither will Lloyds, Streamline (even through FSB), or RBoS.

My company? An ethical tour operator supporting locally owned hotels throughout South East Asia. Very middle class and very safe.

Barclaycard Merchant Services will, but with 90 days deferred payments (i.e. they keep our money for 90 days) - which not only threatens to strangle our cashflow, but also penalises us for being successful (i.e. we won't be able to pay our suppliers if we have a particularly good month, so we'll have to TURN DOWN bookings!!).

It's so frustrating, but I need to know of any suggestions / alternatives you might have. I have seen an absurd online merchant service that charges 8% - which is ludicrous.

Help?

kimbatty

http://www.worldpay.com/
http://www.protx.com/

There's these 2 for online payment solutions

I use Barclaycard myself and they've been brilliant. Is there no way they can agree to just have the deferred payment period for a short time until you are more established ?

MarkyMarkD

Tour operators are inherently very high risk for the card companies, as there is major compensation claim risk if something goes wrong. I'm sure that they perceive that this is far more likely for a small operator, so I can see why they are being cautious.

If the 90 days deferred basis won't work for you, then isn't the problem really that you don't have enough working capital to run the business?

And as kim said, I'm sure that Barclays would review the deferred payments approach after a period of time.

Sam_Bee

MarkyMarkD wrote:

Tour operators are inherently very high risk for the card companies, as there is major compensation claim risk if something goes wrong. I'm sure that they perceive that this is far more likely for a small operator, so I can see why they are being cautious.

If the 90 days deferred basis won't work for you, then isn't the problem really that you don't have enough working capital to run the business?

And as kim said, I'm sure that Barclays would review the deferred payments approach after a period of time.

Our liability insurance covers us for compensation claims.

Point 2 could be valid - but obviously it's in my interest to get the best possible terms for my business! I was prepared to put up a bond if necessary (which is the standard terms for similar companies). Yes, we could cover ourselves and survive - but put it this way (for a simple equation a 5k holiday!) -

We take a deposit at point of sale (i.e. £1000). 8 weeks before travel we take
full payment (i.e. £4000). 4 weeks before travel we pay the suppliers (i.e. £4000). We are then out of pocket for £3000 for a further 60 days (for simplicities sake saying our margin is 20%).

If that month we take 10 bookings we are down by £30,000. If we take 30 bookings down by £90,000 for 60 days.

I know this is horrifically simplified (so don't target the figures!), but as an owner of a small business I would prefer this not to be the way! Surely you have to fight for the best terms possible? It also removes our advantage in receiving money before we pay our suppliers, putting us in a great cash flow situation.

Also, it's fly by night flight only operators that tend to be companies that go out of business (again a generalisation!).

MarkyMarkD

The problem with the insurance argument is that companies which are about to go bust tend to fail to pay their insurance premiums, or there are other reasons why the insurance doesn't cover the circumstances which end up falling back on the card companies.

I think you should reconsider taking the full payment 8 weeks before travel, in your circumstances. As a customer, it wouldn't put me off significantly (if your product is unique or at least "special") having to pay 12 weeks before travel, or even 16 weeks. That would dramatically reduce the cashflow issue inherent in the card company delaying payment by 90 days.

Is the delay the same on debit and credit card payments? If not, you could obviously charge a credit card supplement (or offer a debit card discount) to encourage payment by the method which best suits you.

I'm sure you are aware that it is very common in the travel industry to make credit card charges - precisely because they are one of the highest-charged by the card companies, for the reasons I've stated before.

Sam_Bee

MarkyMarkD wrote:

The problem with the insurance argument is that companies which are about to go bust tend to fail to pay their insurance premiums, or there are other reasons why the insurance doesn't cover the circumstances which end up falling back on the card companies.

I think you should reconsider taking the full payment 8 weeks before travel, in your circumstances. As a customer, it wouldn't put me off significantly (if your product is unique or at least "special") having to pay 12 weeks before travel, or even 16 weeks. That would dramatically reduce the cashflow issue inherent in the card company delaying payment by 90 days.

Is the delay the same on debit and credit card payments? If not, you could obviously charge a credit card supplement (or offer a debit card discount) to encourage payment by the method which best suits you.

I'm sure you are aware that it is very common in the travel industry to make credit card charges - precisely because they are one of the highest-charged by the card companies, for the reasons I've stated before.

Mark - thanks for feedback - keep it coming. You have good insight - do you work for a bank (if you don't mind me asking?!).

But to add -

Our insurance is paid 12 months in advance.

Unfortunately 8/10 weeks before travel full payment is the norm, and I'm wary of being uncompetitive for this reason.

The main reason for travel companies to charge the cc surcharge is because we have one of the lowest margins in business - (between 10-16%) due to the competitive nature of the industry. So paying 2% in cc fees would have to be absorbed elsewhere if you didn't charge it upfront.

You can chargeback on debit cards (I know banks don't like telling this to consumers though!) - so yes, they keep our debit payments.

I will of course encourage people to pay by BACS or cheque, but am wary of appearing 'desperate' by encouraging payment by these methods! It would put me off if a company appeared to desperately put me off paying by a cc (although we will of course advise that we are 100% covered irrelevant of wether people pay by cc or cheque..).

ukbill69

Use http://www.barclaycardbusiness.co.uk/

chriz1000

As Kimbatty says, can’t you use an online merchant? Even Paypal offers this facility. With No/very few questions asked. I know it’s not the most ideal situation but it certainly would solve you cash flow problem.

Once you are established and the bank can see good money management it should improve your chances of getting a better merchant deal. When we first started out it took a lot of persuading to get a terminal and merchant account setup, with us having to use a manual swiper for about 3 months. With our last business that we setup, few questions were asked and we had a new terminal and account setup within a week.