Am I A High Risk Merchant?: What to Do If Your Business is High Risk

Running a high-risk business can be tough. The label applies to companies that meet certain criteria that make lending or payment processing a risky endeavor. Every business owner should know whether or not they are considered a high risk before making any financial or operational decisions or applying for credit or loans.

What Is a High-Risk Business?

A bank or merchant account provider will review a number of aspects of your business to determine whether or not it should be considered high risk. The two major factors including the industry you work in and the likeliness of financial failure. The latter would include things like:

  • A new business with little credit card processing history
  • A business with a high number of chargebacks
  • A business that lost a previous merchant account due to chargebacks
  • A business that operates in countries with a high chargeback risk
  • A business with a poor credit history

5 Common High-Risk Businesses

Even if your business has a great credit history and an acceptable number of chargebacks, you could still be labeled a high risk due to your industry. Those that attract a high number of legal restrictions or commercial disputes often fall into this category. For example, after the subprime crisis, the construction industry was viewed as high risk. Banks became reluctant to offer merchant account services due to the volatility of the market. Other common high-risk businesses include:

  • Marijuana dispensaries and tobacco sellers – Many merchant processors avoid these types of sellers, especially those in the marijuana industry. It’s currently considered a legal grey area which could put the business at risk.
  • Airlines – Payment processors often avoid airlines because they have a high rate of refunds and cancellations.
  • Nightclubs and bars – Many nightclubs and bars do not accept credit cards because of elevated risk. This occurs because these venues often encounter legal problems related to underage patrons or unruly behavior.
  • Guns and weapons dealers – Guns and weapons dealers automatically come with a high level of liability, making them less attractive to a payment processor.
  • Adult industry – This industry is almost always labeled high risk because businesses operating within it often shut down which can lead to major losses. There are also many laws and regulations related to serving an adult industry business.

Where Can I Find Payment Processing for My High-Risk Business?

If you own or plan to open a high-risk business, there are options available. South West POS Technologies offers high-risk merchant services that include cash advances, chargeback protection, ACH processing, and data security. Contact us today to learn more about our high-risk business accounts.