We all know that the CBD industry is a gold rush, but getting approved for a CBD merchant account feels more like navigating a minefield in today’s time. Many CBD entrepreneurs face merchant account application decline even with 100% legitimate businesses. The good news is you can beat the system if you truly understand exactly how the underwriters think.
This guide is going to reveal why CBD merchant account applications get declined and the proven strategies that will help you to lock in your approval fast.
The Brutal Truth: Why Most CBD Merchant Account Applications Get Declined
Incomplete Documents.
Some merchants apply for CBD payment processing and provide incomplete KYC documents; sometimes they miss key legal documents or provide inadequate COA lab reports. Some don’t even provide the domain ownership and expect that the account will be approved.
Website Compliance Failures
Some fail to comply with the website compliance requirements. Simple tweaks on your website can ensure underwriters like your presentation. Making any unverified health claim will ensure 100% rejection of your merchant account application. You are working in a regulated industry, so you should not miss the legal disclaimers on your website. This product is offered to people who are over the legal age, and that is why your website must have an age verification tool. To ensure that the merchant account does not get a lot of chargebacks, your website must have an easy-to-understand refund policy.
High-Risk Product Categories
Ingestibles, tinctures, and vape products are flagged as elevated risk. Many merchants fail to get the approval because they add high-risk products to their website, where, in reality, these hardly bring any business for them, while CBD drops and gummies and other similar products are easy to approve. Other products, such as injectables, tinctures, and vape products, are difficult to get a yes for.
Regulatory Gray Zones
Another reason is the regulatory gray zone, where the variation in the federal state and international law can also impact the account approval. If you work with the right payment processor, which truly understands the industry and has worked with international CBD merchants, then there is a high chance that they will review your account wisely and approve it once you meet the required conditions.
Financial & Processing History Weaknesses
Another reason why your merchant account application may get declined is because of a lack of previous processing history. Many CBD merchants believe in hiding their previous processing history; some of them process with Stripe and PayPal and do not display this information to the processor, which is not a good sign.
When you present your processing history, then the processor can analyze your potential transaction volume. It also helps the underwriters to evaluate your risk profile. If your business is going through financial instability, then this can also create a big roadblock. A negative balance sheet is another problem.
The Psychology of High-Risk CBD Processing Underwriters (Understand Their Mindset)
To increase the chances of your merchant account approval, it is important for you to think like the underwriter, not like The Undertaker. You need to understand their mindset. These underwriters are highly skilled individuals when it comes to risk identification and risk mitigation. They are not trying to sabotage your business; they are just doing their simple job. The job is to allow genuine CBD merchants to get access to the payment processing system and avoid the bad actors.
It is the underwriter’s responsibility to protect the acquiring bank from legal, regulatory, and reputational risks. They want to avoid merchants who trigger regulatory audits. Basically the underwriters want to work with merchants who can survive financially and fulfill orders as per the terms of service written in the merchant account agreement.
When you change your thinking pattern from a merchant’s standpoint to an underwriter’s standpoint, you definitely are going to increase the chances of the account approval. Basically, what you have to do is present a profile that they want. If there is something that is missing, then you better fix it before making the application.
Remember, you must present yourself as a safe, stable, and fully compliant opportunity for the underwriters so that they feel confident and say, Yes, we can.
Your Playbook: How to Drastically Improve Your Approval Odds
To significantly improve the chances of your approval, just follow these simple steps. Keep your trust in us; these steps will help you get fruitful results.
Prepare Flawless Documentation
Present your documentation like a professional. Make sure you add all the documents that are requested by the payment processor. These include the article of incorporation and your business registration. Federal EIN number/tax ID number and updated COA lab reports from an ISO-accredited lab.
You’ll also give a full list of products with detailed descriptions to the underwriters for a comprehensive review. Make sure you provide clear, valid photo IDs. Along with that, you will also have to produce the latest utility bill for address verification. The underwriters will also need to verify the domain name that is owned by you, and for that you can present the domain purchase receipt and the WHOIS screenshot.
Perfect Your Website Compliance
When you start thinking like an underwriter, then you will not be able to ignore your website compliance. It’s the first thing they are going to look at before looking at your documents. Make sure your website is fully operational. The pricing, description, refund policy, and disclaimer all should be present.
Proudly display the COAs publicly for each product. This will not only convince the underwriters but will also ensure that your customers feel safe when they buy from you. Make sure your website loads fast and has a valid SSL secure checkout page.
Demonstrate Financial Stability
Another important factor is your financial stability. Underwriters consider that financially stable businesses can be a long-term asset for the payment processing institutions. For this, you can provide 3 to 6 months of strong business. Sending a statement that has a minimum available balance is not a smart move; it is a big turnoff for underwriters.
If you are already processing payments through another payment processor, then make sure you provide your last 3 to 6 months of processing history so that the underwriters can calculate your monthly sales volume and also visualize how many chargebacks and returns they can expect if they onboard you.
Work with a True CBD Specialist Payment Processor
Mainstream processors prefer to work with low-risk industries; you should work with CBD specialist processors that underwrite CBD accounts every single day.
Why QuadraPay Has Leading CBD Approval Rates
QuadraPay is a partner of various high-risk payment processes that underwrite high-risk merchant accounts for businesses operating in different industries. Our years of experience in supporting high-risk businesses and direct relationships with CBD-friendly payment processors can greatly improve the success ratio of your application. Our team gives you personalized application guidelines that help you reach your goal faster. We are also startup-friendly, which means if you are just starting your CBD business and trying hard to get a merchant account and not succeeding, we will treat you well. All these factors help us in increasing the approval rate of CBD merchant account applications.
Ready to Get Approved? Start your CBD merchant account application now, and let our expert team guide you from day one.
Frequently Asked Questions (FAQ)
Q1: Can a startup CBD business get approved?
Absolutely start up. CBD businesses can definitely go ahead and apply for the merchant account; however, preparation is a must. Most payment processors accept startups with proper documents.
Q2: Are ingestible CBD products harder to get approved?
Yes, topicals and skin care are slightly harder to get approved.
Q3: Does my website really impact approval?
Your CBD website can be one of the top reasons for the application rejection. Your website is your online storefront, and you must get it right.
Q4: What’s the fastest way to get approved?
To get approved for a CBD merchant account, you should work with a CBD specialist like QuadraPay. We work hard hand in hand with you. Our team will review your application initially and suggest legitimate ways to improve approval chances.
Q5: Can I use Stripe or PayPal for CBD?
Many merchants used Stripe and PayPal for CBD products; however, our suggestion is simple: you should work with a payment processor that takes time to fully review your application and can support your business for the long term.
