MLM & Biz-Op Companies: How to Overcome Merchant Account Obstacles - DirectPayNet

MLM & Biz-Op Companies: How to Overcome Merchant Account Obstacles


Multi-level marketing (MLM) companies, business coaches and other business opportunity (biz-op) ventures all face issues with getting approval for a merchant account. Banks and other payment providers are weary to work with these high-risk models. This is thanks to reputational damage caused by a few dishonest operators in the industry. Therefore, many merchants in this niche fail, as they can’t get scalable payment processing services. Consequently, it causes serious cash flow issues.

But why exactly do MLM and other biz-op models suffer from such devastating reputational damage? We answer this question below.


Why does the biz-op industry garner such negative publicity?

Biz-op as an industry has received an exceptionally bad wrap over the last few decades after several MLM opportunities were exposed to be pyramid schemes. Since the structure of MLM companies is similar to that of pyramid schemes, sometimes banks and payment processors have difficulty distinguishing between honest operators and deceitful ones. But these reputational issues don’t begin and end with companies created with a multi-level structure.

Frauds and scams involving so-called “business gurus” who share questionable wisdom for thousands of dollars are frequently exposed in under-cover operations. With the cynicism and legal action surrounding this industry, it’s not surprising that entrepreneurs in this vertical are labelled high-risk merchants (even the good guys).

So how can you improve your chances of getting a business opportunity (biz-op) or MLM merchant account?


Some payment providers react differently to biz-op merchants

Broadly speaking biz-op merchants typically offer the same overall benefit to prospective customers – to become their own boss or assist with launching a company or franchise. The goal may be to sell products from home on a commission basis, or equally, pay an entrepreneur to learn how to launch a company in a certain industry. Regardless of the model, these ventures have the same goal: generate an independent source of wealth for everyone involved.

Despite having the same overall principles, payment providers identify some differences in how biz-op merchants earn their revenue. For instance, with an MLM opportunity, a provider sees customers may be expected to pay an upfront fee for stock or inventory of a product. After individuals below you in rank are paid for referring new members to your sales unit. This is big risk for buyers; therefore, it could run up large chargeback volumes and, in turn, may be unfavorable for processing solutions.

Alternatively, an acquiring bank may be more comfortable with business-coaching merchants that sell tickets to their live speaking engagements. Increasingly digital products like e-books or online courses that require a one-time fee for access are offered. This product type may be simpler to approve for a merchant account. Similar merchants may opt for a subscription model (customers make recurring payments for ongoing use of an online platform). Those users access a vast library of content to absorb and implement their own business. However, the further complicated your product is, the more challenging the screening process will be with your payment provider.

So what’s the best way to differentiate yourself to processors as a startup in this industry?


Improve your chances of getting a merchant account

There are a few ways to stand out from potentially insincere rivals if you’re suffering from the negative reputation surrounding your industry. For instance, don’t start off by selling an online coaching session or course at $10,000 a pop. Banks and payment processors will be worried about steep refunds and chargebacks. Also, you’re going to be considered as a very high-risk merchant with such a high ticket. 

Start selling products with more affordable prices below $1,000, as it will lower risk levels and decrease the chances of fraud. You will also be a much more appealing prospect to payment solution providers. What’s more, offering steep discounts help to get clients through the door and develop a solid business reputation. You can then incrementally increase prices as word spreads about your amazing products and/or services.

Additionally, rather than launching with a rebilling model, explore selling products for a one-time fee to start. After trust is established with a payment provider for 60-90 days, they will be more inclined to accept subscription-based sales.

Operating in an industry with a bad reputation is just one of many factors that payment processors review when deciding whether or not to grant you a merchant account. Check out the full list of high-risk merchant criteria, to gain a better understanding of what to look out for, and how to better protect yourself.


Basic requirements for a biz-op merchant account

MLM and business coach merchants need several basic requirements in place before applying for credit card processing.

  1. A fully operational website is mandatory and should include a blindingly obvious refund policy, and terms of service page that is detailed and unambiguous.
  2. Evaluate your business opportunity products. Your offers should have clear descriptions. Also, do not publish unquantifiable sales claims about the benefits of using your products. If your product pages look like they’re basically a written infomercial, the chances of approval for payment processing are lower.
  3. Publish proper contact details on your website. Real addresses, customer service telephone numbers and regularly monitored email addresses are all essential in proving to payment providers that your business is legitimate.
  4. Make sure you have a business bank account with statements demonstrating there are sufficient funds to continue operating for the foreseeable future. Having processing history is also in your best interest. This will be a deciding factor for just how much monthly volume will be allowed. It will also establish how much reserves will be held. Furthermore, wait until you have some payment processing under your belt to be approved for a high ticket limit.
  5. Finally, it’s vital that you respond to online reviews and complaints, as you are conducting your business in such a supposedly murky industry. Whether it’s the Better Business Bureau (BBB) or another community board, answer all inquiries good and bad. Your good reputation may make a difference. Merchant account providers look at online reputation to establish whether they will approve an MLM or other biz-op model.


Wrap Up

MLM, business coaching and other biz-op merchants all can provide valuable solutions to clients when delivered honestly. Reputational damage caused by previous scandals that have unfortunately tarred many merchants with the same brush might be hurting you. But, it’s not all doom and gloom!

It’s possible to still scale your business with a biz-op merchant account by delivering outstanding products and customer care whilst simultaneously reducing the risk for payment processors. Fortunately, we specialize in helping high-risk merchants with securing merchant accounts. If getting approval to accept credit card payments for your biz-op offer is a challenge, contact DirectPayNet today.

About the author

As President of DirectPayNet, I make it my mission to help merchants find the best payment solutions for their online business, especially if they are categorized as high-risk merchants. I help setup localized payments modes and have tons of other tricks to increase sales! Prior to starting DirectPayNet, I was a Director at MANSEF Inc. (now known as MindGeek), where I led a team dedicated to managing merchant accounts for hundreds of product lines as well as customer service and secondary revenue sources. I am an avid traveler, conference speaker and love to attend any event that allows me to learn about technology. I am fascinated by anything related to digital currency especially Bitcoin and the Blockchain.