Don't go home without it. (merchant cards for home-based businesses)
by Daniel Janal

Don't start a business without it. "It" is a bank's merchant card account that allows businesses to accept credit cards for purchases. Consultants, professionals, designers, desktop publishers, and others who use their computers to work at home can benefit from merchant cards, too. These accounts can be used to ring up quick sales instead of waiting for checks to arrive in the mail. Credit cards work.

Commercial banks have traditionally looked down their noses at home-based businesses, however. A misguided folklore at banks says that home businesses are fraught with fraud and abuse that will cost banks millions, so they give preference to businesses with storefronts. As a result of this questionable stereotype, many home-based businesses are being unfairly denied access to merchant cards.

I was lucky and got a card from my bank--but I had to jump through many hoops and find a bank officer willing to fight for me. I submitted a three-page business plan that outlined my company's goal; its successes in dealing with high-profile clients over five years; and my biography, which included profiles in USA Today and Success Magazine. (If you need help writing a business plan, use Biz Plan Builder, software from JIAN Tools for Sales). The business-plan method worked well for me. In the end, I was issued the card.

Others, like Bill Goodman of Cyclos, a San Francisco-based shareware company, haven't been so lucky. He had a merchant account in another state but ran into obstacles when he moved to California.

"I spent about two weeks working with the vice president at my branch trying to get a merchant account. She was very enthusiastic and seemed convinced I was a good credit risk. She agrued with the board at length trying to get them to accept my application," said Goodman, a shareware author of a Macintosh data compression program called Compact Pro. "I took in statements showing large assets for the company, no debt, offered to put up $15,000 in a security account, showed them a year's worth of statements from my previous VISA account (with one chargeback for the year), and still they didn't think I was acceptable. I am convinced that this bank officer did her best to get me approved--in fact, I went ahead and opened my business accounts there later because I was impressed with her attitude."

He isn't giving up so easily. "I don't think it's impossible--it just takes time. The last time I got an account it took me about four months of going to different banks."

Where there is a need, vultures surely follow. The credit card industry is no exception. Small ads in business journals around the country say they can provide merchant card access. I called one company and found that I qualified for such service--if I paid a $200 application fee, paid a 5-percent charge on orders, and leased an electronic terminal to verify purchases for $79 a month--for four years! This is highway robbery to say the least. Unless you are doing a landslide business, you won't make money.

Here are tips you might find useful in applying for a merchant card.

* Don't emphasize the red flags of "home business" or "mail order." If you sell your product at seminars, conventions, or face to face, accentuate those dealings.

* Indicate that your business doesn't have large sales and its customers aren't likely to be fraudulent.

* Offer to provide a security deposit. The bank will hold this money in an interest-bearing certificate of deposit.

* Check with your professional associations to see if they have affiliations that can secure a card for you. For example, the American Bar Association can provide details for its members.

* Ask your peers where they received their accounts. At one time, seven out of ten new busineses failed. However, since the advent of the home-based business, that figure has dropped to three in ten. Obviously, home-based businesses have had a lot to do with the success of American enterprise. It's time for the banks to wake up to this fact and make it easier for home-based businesses to obtain merchant status.