Understanding Underwriting

01|2022

The underwriting process can be confusing and frustrating, but it doesn’t have to be! Understanding what information the underwriters are asking for and why it’s being requested can help put merchants at ease and speed along the process. After all, an underwriting review is necessary in order to be approved for a merchant account, and a merchant account is essential for a successful business!

What is Underwriting?

Underwriting is the process of assessing the application before boarding a business for a merchant account. They determine that all information provided is accurate and that the business meets certain basic standards in order to process card payments. The underwriting team reviews personal information and credit history, financials, business registration information, and more. The underwriter’s goal is to ensure that the business owner, the customers and the processor will all be protected against fraudulent practices.

What to Expect

Once your application for a merchant account has been submitted, the information is sent to our underwriting team for a manual review. This review process can take anywhere from 24 hours to 30 days depending on whether additional information is needed from the merchant, but most reviews are complete within 5-7 business days. Some accounts even auto-board, which means that they were able to be fully verified through the auto-approval system within 24 hours and don’t require a manual review at all!

If your application does need additional information, this is usually because something is not matching in the Underwriters system or they need supporting documents to verify the information already provided. For example, sometimes the banking information provided on an application does not get validated when it’s submitted – providing a void check for the bank account shows that the account is valid and that there weren’t any mistakes on the application. The Underwriters may also ask for marketing material, such as a website, business card or advertisement flyer, to show that the business is established and has an online presence. They may also ask for information on the business practices itself, such as average delivery time-frames or whether advance payments/deposits are accepted.

Some new merchants may question why all of this information is needed, and it can certainly feel overwhelming. Simply put, your application for a merchant account is very similar to a loan application. When a bank receives an application for a loan, they determine whether they are willing to take on the risk of an individual missing payments or defaulting. They look at financial history, credit reports and personal information to make their decision. In the same way, a processor is reviewing this information for a business and the business owner to determine whether they are able to meet certain financial obligations in order to be approved for an account. This includes the ability to pay the associated fees of having a merchant account open, or to cover potential chargebacks that may be initiated by their customers. In the case that a merchant is unable to cover these events, the processor must provide the funds instead and take the loss. There is also always the chance that an application is fraudulent, and business owners and customers need to be protected against their information being used. A big part of the Underwriter’s job is to assess each application thoroughly in order to offer these protections.

This may seem excessive, but there’s plenty that can be done to avoid a lengthy review of your application!

• Ensure the personal and business information on your application is correct
• Be as accurate as possible when providing average volume and transaction amounts
• Provide bank statements to demonstrate financial support
• Provide supporting documents such as an SS4, void check and drivers license
• Stay in communication with your representative in order to promptly address any concerns

Why Was I Declined?

There are many reasons a business might be declined for a merchant account during the underwriting process. Let’s go over a few common reasons, and the solutions!

• Application Inconsistencies
  • A business may be declined if the underwriters are unable to verify the information provided on the application, or if incorrect information was provided. This is why it’s very important to make sure all information is accurate and up-to-date. Providing supporting documents such as an SS4 and void check can also prevent this type of decline.
• Unsupportive Banking
  • A business may be declined if the underwriters feel that the financials are too inconsistent or cannot support the risk associated with the account. Remember, their focus is to ensure a business can cover the related expense with merchant accounts. Check with your rep that your average transaction and monthly estimates are accurate for your business. Also, make sure that your bank statements don’t reflect a negative ending balance!
• Credit Score
  • A business may be declined if the signer on the application does not meet the minimum credit score required to approve the account. Consider having a different signer listed on your account in the case of multiple owners or business partners. Otherwise, it may be best to work on raising your personal credit score and reapply when you meet the requirement.

Other common decline reasons could be a negative history with a prior processor, a credit risk alert or an open collections balance. These can be difficult to navigate but not impossible – communicate with your rep on the best approach towards resolution.

And of course, don’t be afraid to ask questions! Your account representative is here to work with you to get your merchant account set up. We want you to fully understand the process, what’s being asked of you, and why. Contact Us to discuss this process in more detail and get set up with your own personal representative.