The card associations require that every business applying for a merchant account provide proof of financial stability. These documents come in the form of existing merchant statements, interim financials, audited financials, or tax returns.
Card holders have up to 180 days to issue a dispute, known as a chargeback. Therefore, if your organization processes $100,000 per month, there is potentially $600,000 of risk. Business financials are evaluated to determine the economic stability of the company. While underwriters evaluate several factors when determining risk, almost all merchant applications will require business financials.
Merchant statements provide a comprehensive report of debit card and credit card transactions, settlement reports, chargebacks, monthly volume, average transaction amounts, and a distribution of transaction classifications. Merchant statements are a great indicator of processing but they do not provide enough financial data for underwriters to issue approvals. Typically we will need two (2) consecutive months of merchant statements, however additional statements may be requested by our underwriting team.
Underwriters will accept interim financials. Interim financials provide a financial scorecard of a company and typically cover a period of one year or less. These include a balance sheet and a profit / loss statement. In the reporting section of any accounting software (i.e., QuickBooks), these two reports can be generated immediately.
Depending upon the size of the organization, the amount of expected processing, and the time of the year, an underwriter may request audited financial statements. Audited financial statements are reports that have been prepared and certified by a Certified Public Accountant (the auditor). The auditor certifies that the financial statements meet the requirements of the US GAAP (Generally Accepted Accounting Principles). Audited financials are required for larger organization where the credit card processing volume exceeds a predefined threshold as defined by the card associations.
Corporate tax returns are detailed financial documents filed annually with the IRS (Internal Revenue Service). These returns are setup in a standardized worksheet format to provide specifics on income and expenses. For certain approvals, tax returns may be required by underwriting.
A cross corporate guarantee (CCG) is used when (1) a business does not have corporate financials to provide as part of the underwriting process and (2) ownership does not want to sign a personal guarantee. Cross corporate guarantees are very common when a business opens a new location under a separate legal entity or creates a new division of the business under a separate legal entity. Pursuant to card brand (Visa, Mastercard, American Express, and Discover) regulations, all legal entities must provide corporate financials (i.e., a balance sheet and profit/loss statement), provide a personal guarantee, or utilize a cross corporate guarantee. Cross corporate guarantees will remain in effect until the legal entity can provide sufficient financials to Elavon's underwriting team, at which time the cross corporate guarantee can be removed.
Velocity Processing is a registered Independent Sales Organization (ISO) / Member Service Provider (MSP) of Elavon, Inc. Georgia, a wholly owned subsidiary of U.S. Bancorp, Minneapolis, MN. Elavon has been processing electronic payments for 38 years and maintains an "A+" rating with the Better Business Bureau.