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Need financing. Merchant account is frozen for audit.

     
7:41 pm on Dec 4, 2005 (gmt 0)

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Hi, I started a new merchant account with a new company and they decided two perform a security audit two months in to my account for high dollar sales. I am thinking, Hello? this is the busiest season of the year for now, of course I'm going to have high dollar sales. Anyway, my Visa and MasterCard settlements have been held since November 25th.

Does anyone have any creative ideas for paying your suppliers, supplies, employees, and other expenses while your money is being held?

8:33 pm on Dec 4, 2005 (gmt 0)

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I used a firm to pawn my car once it was pricey but I had no other choice, I needed around 7000 pw working capital, each week for 3 weeks.

Nightmare, I also wacked credit cards up and borrowed from family and the bank.

2:49 am on Dec 5, 2005 (gmt 0)

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I've had this happen before and the best advice I can give is call them up constantly and bug them about it. Send them your tax returns, financials etc.. which I'm sure they have already asked for. And if you haven't completely canceled your previous merchant account, start processing orders through them.

But I've been there so I know how much of a pain it can be.

3:13 am on Dec 5, 2005 (gmt 0)

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>> I also wacked credit cards up and borrowed from family and the bank.

Youch! That could be a recipe for financial disaster.

4:22 am on Dec 5, 2005 (gmt 0)

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I assume you have Net 30 terms with most of your suppliers, so that should get you to christmas.

Around Christmas (I wouldn't want to scare them to soon), contact your supplier and let them know what is going on. Most suppliers should be accomadating.

You need to keep your employee's happy however, they don't want to be short changed before Christmas.

Have you contacted your Credit Card Processor, and try to reach an arrangement, like holding only 50% of deposits. This will give you some cash flow.

Of currosity, are you dealing directly with a bank or some third party payment processor. I hear of a lot of horror stories with third party processors, pulling this off, but never when dealing with a major processor that deals directly with the bank, (eg Global Payments, Moneris etc).

Keeping a second processor around, is not a bad idea, incase the primary one tries to put you out of buisness, however this luxury will cost you a several hundred dollars a year, in minimun monthy maintenace fees.

6:34 am on Dec 5, 2005 (gmt 0)

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I am in a similar situation as you. My merchant account has a 30 days settlement period and whenever I have a surge in sales I would have major cash flow problem. Just this past 2 weeks I already put $9000 and counting on my credit card tab. If your sales volumn is very high, you may also want to talk to your bank to give you a LOC to get through this period of time.

As long as you can manage to pay your credit card/loan in time there isn't much cost involved.

6:55 am on Dec 5, 2005 (gmt 0)

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> net 30

My main supplier only accepts credit cards or COD/wire for bigger purchases. I have net terms with some suppliers so there is some relief there.

> Keeping a second processor around

Thanks for the suggestion. I am looking into it - the luxury might cost me $300 per year ($25 per month).

> you may also want to talk to your bank to give
> you a LOC to get through this period of time.

I do have a $10k LOC which I used immediately last week. Assuming I pay it off in 30 days. But that will be gone early this week as I pay my immediate inventory and shipping expenses. If things get desparate, pawning the car sounds would be an option. But talk about high interest rates!

12:37 pm on Dec 5, 2005 (gmt 0)

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What about the 30K you make a year from adsense? Doesn't that ease your cash flow?

And if your account is frozen, any bank will lend against the amount frozen, presuming it is legit.

Sounds like you are on the fast track to becoming a millionaire! Good luck!

4:04 pm on Dec 5, 2005 (gmt 0)

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> What about the 30K you make a year from adsense?
> Doesn't that ease your cash flow?

I posted in that thread, but that is not me. I only wish! :) Maybe 1k a year on AdSense.

5:41 pm on Dec 5, 2005 (gmt 0)

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And if your account is frozen, any bank will lend against the amount frozen, presuming it is legit.

Sadly not the case - we were on a 45 day delay for the first year on our merchant account. And the bank (who also ran the merchant account) wouldn't lend us a penny of the month and a half's revenue they were sitting on. Still makes me angry.

5:57 pm on Dec 5, 2005 (gmt 0)

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Sun - I would first find out how long a "security audit" takes. In the process, try to get them to hurry it up. Find the human doing the audit, help them suck up to them but - whatever you do - BUG them until the complete the audit.
6:20 pm on Dec 5, 2005 (gmt 0)

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And, assuming this doesn't put you under...make sure you set aside some "petty cash" to cover a couple of months of payroll, expenses, etc. to protect yourself from getting in a pinch again.

Freq---

6:41 pm on Dec 5, 2005 (gmt 0)

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You might need to go bank shopping!
Find a business bank that offers "receivables financing." That might get you on the right track. You might open a credit line wuith them for now and get the ball rolling to give them your merchant account business once the rush is over. Good luck!
6:44 pm on Dec 5, 2005 (gmt 0)

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When opening a merchant account, always high-ball what you think your sales are going to be, then double it.

It appear that most of the problems occur when you tell them what your annual sales are going to be, and then the Merchant Provider get scared when you exceed this amount.

6:44 pm on Dec 5, 2005 (gmt 0)

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Lorx: I did have some sleepless nights when the payments from the processor failed to show up on time, it was just after a large one had gone bust.
9:03 pm on Dec 5, 2005 (gmt 0)

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Perhaps use a third party processor for sales in the mean time. Even paypal will give you your money reasonably quickly, even if the rate and user experience isn't quite as good. That will mean that the amount you're unable to pay your suppliers won't keep growing.
1:50 am on Dec 6, 2005 (gmt 0)

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Isn't it the third party payment processors that are the problem. They generally take higher risk accounts, and are not that highly capitalize and are more likely to get nervous.

My understanding is that the first party processors (what I call the major banks, and their solutions, eg moneris, global payments, etc) are highly capitalized, and they do the risk up front. Its harder to get setup, you have to jump thru more hoops, and forget it if you are in a high risk buisness (ie adu*t entertainment). But they are much less likely to scr*w you around, once you are setup, and if you play by the rules.

2:22 am on Dec 6, 2005 (gmt 0)

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You might want to try contacting some companies that do "factoring" (search google). I've never spoken with them about factoring a merchant account, but when I was in the software biz we used to factor larger ($20k +) invoices for cash flow in the beginning.
3:59 am on Dec 6, 2005 (gmt 0)

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try using your old accounts unless you've closed them...If you closed, call them and Re-open them...I fyou have some history with them it may be easier...

Try the third party providers..PP.2co, etc....

Try every other provider you can think of!

out of curiosity, how much did you tell them you were gonna do and how much did you actually do /month?

Best of luck--

9:22 pm on Dec 6, 2005 (gmt 0)

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Mabe BankCard Central can help you with a business cash advance and help you through your bind. PM ME I will get you to someone who can evaluate your situation and possibly help.

I hope things work out.

12:11 am on Dec 7, 2005 (gmt 0)

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Nice timing on their part. Looks like a good way to get some extra cash from interest on YOUR money this holiday.

Good luck with this!

2:51 am on Dec 7, 2005 (gmt 0)

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I hope everything works out.
12:42 pm on Dec 7, 2005 (gmt 0)

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Communication is a key. Merchants tend to forget that before this money is your money, it belongs to the MAP. If something were to happen to you, the MAP would be the one that would have to pay the money upfront.

Anytime you think you are going over the limit, contact the Loss Prevention Department of the MAP. This way you can be on record of calling.

Think of it this way, when you get a merchant account, you are asking to borrow money. If you are processing $20,000 you are basically asking to borrrow $120,000. And if you had a credit line like this and needed more, you would call the bank.

This is a very important lesson that you learned. Hopefully once they call some of your consumers to learn that everything was legitimate, the money will be released.

-Corey

2:05 pm on Dec 7, 2005 (gmt 0)

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This is one of the reasons I have hesitated to go for a merchant account with credit card processing.

You need to have the turnover of at least one month or two on your bank account or a credit line of this amount.

I think this is ridiculous. They are charging 3-8 percent of your sales and in addition they keep the interest on the amount they withhold for one month or two.

I think I'll stick with Paypal for credit cards. Even if I am loosing some sales sometimes because of people who do not want to use it. At least I can withdraw the money daily.

2:13 pm on Dec 7, 2005 (gmt 0)

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Maybe you can take Pay Pal as a last resort for new orders.
3:19 pm on Dec 7, 2005 (gmt 0)

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It all depends on what country you are in jecasc. In the United States, and with a mainstream account, payouts are usually 24-48 hours.

Paypal can freeze your account as well because it is their money before it is yours and they have to protect their merchant account.

-Corey

5:07 pm on Dec 7, 2005 (gmt 0)

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> Paypal can freeze your account as well because
> it is their money before it is yours and they
> have to protect their merchant account.

I think the distinction is that Paypal will only freeze the amount in question, now your entire income stream. They could not hold Discover and American Express, but they are still holding Visa and MasterCard.

5:42 pm on Dec 7, 2005 (gmt 0)

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Good news! Just got a call from the security people that the audit is over. There's a few issues that need to be ironed out, but the captured transactions should be settled in the next few days. I do not receive interest payment on the frozen funds.

Two lessons I learned:

1) A backup merchant account is worth the minimal investment of $300/yr to reduce financial stress

2) Have credit cards (with no annual fee) or cash around to cover at least 30 days worth of business expenses should a situation arise

7:49 pm on Dec 7, 2005 (gmt 0)

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Glad to hear everything worked out. For high volume, I have always recommended another merchant account / gateway. This way, if the gateway goes down - you also have a back up.

Also since AmEx and Discover are on a different network and depending on the relationship with the processor / the two companies, the funds might not be withheld. Each MAP is different and even though Paypal might be great for some, too many problems with a few good clients to ever recommend them

-Corey