Merchant Account Application Declined? 4 Reasons Why

A merchant account is one of the many necessities that pave the road to achieving success in business, especially in this increasingly online-reliant world. If it’s your first time applying, however, you may find the process a bit intimidating, particularly due to the extensive list of requirements that come with the application form.

Wednesday, August 16th, 2017

Merchant processors differ significantly in company rules and policies, but the one thing they all share is an approval process. Because a payment processor typically assumes some level of risk to provide you with payment services, they will need to evaluate your business to determine if you’re fit for the partnership.

What risk, you might ask? Well, a merchant account facilitates payments by giving you access to money earned in a transaction before a customer makes payment. After that, it’s the payment processor’s job to follow up with the client’s bank and retrieve the funds.

However, a lot can happen between the time you complete a sale and when the processor gets their money back. For instance, the cardholder may file for a chargeback because of reasons like fraud or breach of contract, compromising the provider’s reimbursement process. Payment processors, therefore, need to do their homework before signing a business up for a merchant account. If your business poses a high level of financial risk, your application will likely be denied.

Below are four common reasons why businesses find it hard to obtain approval, and how to avoid them in your application process.

Lack of documentation

Payment services providers can request a myriad of documents as part of your application, the standard ones being your passport, business license, monthly processing statements and bank records. You may also need to fill out lengthy forms requiring lots of information.

Failure to answer a question or supply a document may result in your application getting denied. Although it depends on the company’s policies, not complying with the guidelines of the application may be seen as a sign of your inability to follow straightforward rules. When applying for a merchant account, therefore, ensure you understand and provide everything the provider requires.


When you submit your application, the payment processor will thoroughly check that all the information given is true and accurate. This involves contacting your bank and previous processors, reaching out to your business partners and even calling your landlord to confirm that you’re telling the truth about the location of your business. If anything fails to add up, your request will likely be dropped. For this reason, you need to remain 100 percent truthful and open in your application.

The TMF List

If your merchant account has been terminated in the past, your business is likely in the TMF (Terminated Merchant Facility) list. Payment processors often check if an applicant is on the list, and if found, they consider them a risk.

To avoid this complication, ensure that all your previous accounts were left in good standing. If you have anything unsquared with a previous provider, deal with it before applying for another account.

An unacceptable industry

Sometimes you can get everything right and still get rejected by a provider. In that case, the nature of your industry may be to blame. Many payment services firms have a list of business sectors that they are uninterested in, or have deemed them too risky to service. Industries like travel and pharmaceuticals, for example, are considered risky by many providers.

If a processor doesn’t accept your type of business, you can try negotiating with them or applying with a company that is less averse to your industry.


Getting your application for a merchant account declined can be frustrating. Nevertheless, knowing the hurdles to expect will significantly increase your chances of landing the processor you want.

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