Most multi-level marketing (MLM) companies have been trusted household names for decades. These organizations offer compensation partially based on how many new distributors their affiliates sign on are notoriously difficult businesses for which to find a merchant service provider. This is because MLMs have been labeled a “high-risk” business type. Unfortunately, this is a segment of the market with whom many providers prefer not to deal.
Why Is My Business Considered “High-Risk”?
What is considered risky about selling cosmetics, perfumes, kitchen appliances, and other common household items? Inherently, nothing. However, the pyramid-like business structure in which affiliates are financially compensated for signing on new distributors has been the subject of much debate. Most MLMs are legitimate and financially-stable. However, some past organizations have abused this system to create pyramid (ponzi) schemes. These schemes, coupled with the fact that many distributors are only in business for a short time, present a high financial risk to the credit card processing companies.
Does This Mean I Cannot Get a Multi-Level Marketing Merchant Account?
Fortunately, MLMs can get merchant accounts, especially if they have done their due diligence. If the MLM you work for generates most of its revenue through product sales and relatively little through new affiliate sign-ups, it is considered a healthy, legitimate business, which is much more likely to be offered a credit card processing account. Organizations that specialize in high-risk businesses and which are familiar with its nuances such as E-Commerce 4 IM, are better able to assess the true risk that is presented to them. Additionally, they also offer you a favorable answer at an affordable price.
What Does the Process Look Like?
Merchant service providers use several key risk indicators to evaluate MLMs. Factors include the length of time your company has been in business, your past credit history (including your business’ credit score), the amount of negative feedback you have received, your marketing practices (since overstated promises and deceptive marketing are a primary reason for chargebacks), and your business’ overall financial health.
What Can I Do To Improve My Chances Of Obtaining A Multi-Level Marketing Merchant Account At A Good Rate?
Financially healthy companies are always more likely to receive merchant accounts at the best rates. A few ways you can contribute to the overall health of your business include:
Keep a low credit-to-debt ratio
Maxing out your available credit hurts your credit score, which is one of the key factors credit card processing companies consider when assessing the real risk your business presents. Ideally, you should only use 10-20% of your available credit and keep as much of the balance as possible on a single card.
Pay your credit card bills on time
Timely bill payment also goes a long way toward developing a positive credit score. This convinces payment gateways that you are a responsible business.
Minimize your chargebacks
High-risk businesses are known for excessive chargebacks. Minimizing the number of contested credit card payments and bounced cards is essential.
Be honest and up-front in your marketing
When you appear to promise things you cannot deliver, customers often become angry or disillusioned with the product. No matter how many other beneficial results they may have obtained, they may demand a refund or chargeback their card. These chargebacks occur if they did not achieve the same results you promised.
Stay off (or get off) the TMF list
The TMF or Terminated Merchant File list is a database created to identify merchants who have been had their credit card processing accounts flagged for illicit activity, including money laundering, excessive chargebacks, fraud, identity theft, or illegal transactions. It is also accessed by Visa and American Express, so being on this list is the equivalent of being on a shared blacklist that is circulated among most major credit card companies. If you are not already on this list, keep your business dealings honest and avoid high chargeback rates to stay off. If you do end up on the list, contact your merchant services provider to find out why. Often, they can help you to fix your reputation if you are on the list erroneously.
Finally, when searching for a credit card processor, you should not only consider the state of your own business, but the state of your potential service provider’s. A good provider will never charge you hidden fees. Additionally, they will work with you to get you started, keep you supported, and help you grow. If you’re looking for such a company, we invite you to check out E-Commerce 4 IM. We can help you acquire a Multi-Level Marketing Merchant Account. With many years of experience with the “high-risk” credit card processing industry we are qualified to help you.