I’ve been looking for information on MLM Merchant Accounts, and found that I have to dig pretty deep. There are some nuggets that I found, and combined with our experience, we are preparing a special report called, Everything You Need to Know about MLM Merchant Accounts.
The emphasis of the special report will be to explain the many mysteries around MLM merchant accounts. For now, here are some nuggets to help you with the MLM Merchant Account Application process. In our experience with merchant account underwriters and those who deal with credit card payment processing, we’ve picked up some helpful information that share here.
- When completing the application, avoid “triggers” such as “MLM, Network Marketing, Multi-level marketing” and verbiage that would indicate high risk business
- Don’t get overly aggressive on growth estimates. “Slow and steady” is best in projections. We have learned that less than $250,000 ($249,000) in a startup year (typically for an aggregate of 6 months on a rolling view) stays below the underwriter’s radar. Offsetting strategies include multiple merchant accounts and several providers who are familiar with, and specialize in, direct selling.
- Watch out for “memberships” and “subscriptions” that are paid in advance and extend beyond 3 months. Underwriters do not want the chargeback exposure.
- Be honest to a fault. Underwriters dig and investigate. You’ve a better chance of getting backing if you’ve had problems in the past and you are honest about them than if you pretend there have been no problems and hope they do not discover them.
- Holdbacks (where the merchant account providers holds on to a percentage of collected amounts for a period of time to mitigate their risk) can be managed or possibly eliminated in some instances. For example, if the business owners have good credit scores and they are projecting less than $250,000 in revenues, and there is a sound product and concept, then it’s possible to have no holdbacks.
- As a general rule, your target should be 1% to 3% holdback if you must have a holdback, and companies with unsavory past can expect from 5% to 7% holdback in the early months and years. The other variable to negotiate is the period of days / months for release of the holdbacks.
For more information and next steps in setting up your MLM merchant account, additional information is available in the LaunchSmart Workshops and learning systems.