ver the years, when I have been involved in underwriting merchant accounts, I have encountered Merchant Level Salespeople (MLSs) who repeatedly submit deal after deal that will never be approved by the processor. Simple things, including unreadable or incomplete applications, unverifiable street addresses or the type of business applying for the account, will factor into the processor's decision whether or not to underwrite that merchant.

Before their feet ever hit the street, MLSs should understand what underwriting is and everything processors take into consideration to determine if a merchant's business is legitimate.

The submitted application is just the first step. MLSs should make sure the application is legible and completed in its entirety along with all the required materials that need to be submitted with the application. This also prevents the MLSs from having to go back to the merchant to request more information. Get it right the first time and the approval will go through faster.

Most underwriting departments typically follow a process to review the following:

• The type of business the merchant operates
• Projected sales volumes and processing methods
• Whether the merchant has ever been terminated by the processor or reported to the bank through MasterCard's Member Alert to Control High-Risk (MATCH) system, previously known as the Combined Terminated Merchant File (CTMF or TMF)
• Whether the personal guarantor's (owner, officer or principal) credit is not considered excessively derogatory based on projected volume and historical product risk
• Whether the merchant premises have been inspected per MasterCard and Visa requirements
• That all paperwork is properly completed and all required signatures are properly affixed
• That all required documentation is filled out and submitted with the application
• That verification of the submitted documentation has been completed

It's important to make the underwriter's decision easier by supplying information that answers questions about the merchant, including:

• How does the merchant make money?
• How are customers directed to the merchant's Web site?
• How is credit card information captured and handled?
• What is the fulfillment process? ("The greater the time, the greater the risk.")
• What are the order and return policies?
• How long will it take to process refunds?
• If customer service is phone-based, how long is the wait on hold before calls are answered?
• Is there adequate disclosure of Terms and Conditions?
• Are customers subjected to aggressive 'save' programs?
• Are there available quality trade references applicable to the product or service?
• Does the product or service represent a reasonable value?

When making underwriting determinations, I have often been faced with situations in which the applications and materials submitted gave no clue as to what the merchant was really doing. Some of those applications were intentionally misleading and hid the true nature of the business; some MLSs were just too lazy to explain the business fully.

Underwriters need a clear understanding of what a merchant does in order to approve an application, so as a result, the response in these situations is to either ask MLSs to provide more information or to simply decline the application.

Certainly there are exceptions to the approval rules of thumb, but think 'exceptional'-it takes an exceptional merchant to be approved from the non-acceptable merchant list. For example, an industry leader, a merchant selling products with true value, or one with a financially fixed guarantor might fit the qualifications necessary for approval.

Some underwriting departments insist on reviewing copies of the original Articles of Incorporation. If you are asked to provide them, there are several places to access them. Some states make these documents available on their Web sites; some states also include information on limited liability corporations, partnerships, assumed names and other types of listings online.

The Integrity Bankcard Consultants Web site provides links to determine the status of an entity, including links to each state's corporate status lookup page. Access this information at www.integritybankcard.net

Sometimes businesses are incorporated in one state and are actually located in another; you can still find information on these corporations. For example, a business incorporated in Nevada or Delaware, but doing business in California, should be listed in California as a "foreign" corporation, as active and in good standing.

Through the state links, you should be able to locate current incorporation status, including the names and addresses of current officers and/or registered agents, which are usually listed on the state sites.

Some processors don't place as much importance on Articles of Incorporation as others do, however. They find them to be of limited use because attorneys, CPA's and other agents are often involved in filing the original documents as incorporators.

Applications for online merchants have to include additional information. For example, Visa requires that e-commerce merchants' Web sites provide the following:

• A thorough description of the goods or services offered
• A clear explanation of the returned merchandise and refund policies
• A customer service contact, including e-mail address and/or telephone number
• Transaction currency (e.g., U.S. dollars, Canadian dollars) accepted
• Export or legal restrictions (if known)
• Delivery policy
• Consumer data privacy policy
• Security method used for the transmission of payment data

Here is a list of creative approaches that may be available to make a deal acceptable to the underwriters:

• Assignment of service or databases
• Use of pre-funded reserves and/or irrevocable letter of credit
• Capital retention agreements
• Lengthening of settlement timeframes
• Mandate acceptance criteria (i.e. Fraud Scrubbing Services, AVS, CVV2/CVC2, Verified by Visa, etc.)
• Re-working of fulfillment arrangements or return policies
• Third-party indemnity
• Requirement of special administrative reserve accounts at acquiring bank
• Use of personal indemnity or personal guarantees
• Surety and insurance products

Accurately and completely fill out the Merchant Site Survey Report. Through these reports, you are verifying that the application and inspection of the merchant premises are true and correct to the best of your knowledge and belief. You don't want to spend time at "Club Fed" for a fraudulent application you submitted, as has happened to MLSs.

Remember it is important to take the time to completely and accurately fill out the merchant application and provide all the required paperwork. Give the underwriters a clear understanding of the merchant's business. If needed, be creative and obtain additional information through other sources, including advertisements, brochures, phone book listings, business licenses, photographs, samples of products, previous processor statements or financial statements.

David H. Press is Principal and President of Integrity Bankcard Consultants, Inc. Phone him at 630-637-4010, send an e-mail to dhp@integritybankcard.net or visit www.integritybankcard.net.