Merchant processing financing pros and cons

Business finances are a complicated aspect of running a business. One of these aspects you will need to take into account is how to accept payments for your goods and services.

If you own a business that is considering accepting payments, whether online or in a store, via credit card, you will need to know the pros and cons of accepting this type of payment, which is also called merchant processing financing.

How it works
Merchant processing financing works like this-first, you must secure a merchant account. This is a contract between a merchant (you, or the business owner) and the lender or bank. The bank will extend a line of credit to your business so you can accept credit card payments. Usually this is limited to a certain brand or two. This contract or type of financing is required; without it, your business can't legally accept payments by the major credit card carriers.

There are several different ways you can accept payments this way. Some of the more common include:

• Credit card terminals. This type of machine stands by itself and is commonly seen in checkout lanes or counters where one accepts payments. The buyer swipes a card and enters their PIN number or other required information.


• Automated Response Unit (ARU). If your customers are purchasing things over the phone, they may be able to use an ARU, where they type in their credit card information with their touch tone phone.


• Payment gateway. This is used for merchants who sell products online.

Pros and cons
There are a number of pros and cons associated with merchant processing financing. They include:

Pros
Some of the advantages of merchant process financing include the following:

• Convenience for customers. Merchant accounts are the most convenient way to accept payments online, if your business is primarily conducted via a website. This makes it more likely that customers will buy as well, because they won't have to call in and wait to speak to a company rep; instead, they can enter the information themselves.
• Protection. A wide range of software allows merchants to be protected from fraud and hackers, if you are conducting business online.
• Expectations. Many consumers will expect that you will accept credit cards, and it may turn away business if you do not.

Cons
A few of the downsides of merchant processing financing include:

• Timeliness. Don't expect to get merchant processing financing overnight. Because of the high risk of fraud, getting approved for a merchant account takes time as the merchant account financier conducts an investigation to ensure that your company is legitimate.
• Expense. Accepting payments via a merchant account is expensive. The financing charges can be costly for each transaction.
• Fraud. Hackers and other types of fraud can wreak havoc on those who are trying to pay for merchandise via credit card. In addition, laws that protect consumers from identity fraud make it so they do not have to pay for charges incurred on credit cards while the theft is under investigation. The fraud associated with merchant processing are the reason for the higher charges for those who own merchant accounts.

Merchant processing financing can be advantageous for businesses, however, there are also some cons to them as well. It's important that you carefully weigh the pros and cons of merchant processing financing.