Small Business Help

sanaxe1

sanaxe1

sanaxe1

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Joined
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Nottingham
Hello i was wondering if anybody would be able to help. I'm currently running a online Business as a sole trader. The business is running quite well however im looking to expand and move on from Paypal as i personally hate the company. For this i need a Merchant Bank account. However my Credit rating is shocking as i went abit crazy with my overdraft when i was younger and was rejected for the account.

I was thinking of letting a friend join my business ( who i 100% trust ) who has a a good credit rating and will be able to get this merchant account. Now a few questions.

1 ) If i was to change to a Private Limited with both of us as Directors would my bad credit be taken into account if he was to apply for the account ?

2 ) If yes , would if be possible for him to be the sole director but for me to be the majority shareholder so my credit doesn't have a effect but i still own the business?

3 ) Are there any other ways i could do this. ie differnt entertity etc ?

Thanks in advance.
 
Letting someone into your business just because you are not a fan of PayPal is a really bad thing to do.

Let them in only if you need them to help run the business. I set up a business with a mate a few years ago who I 100% trusted and it went belly up. The business and our friendship.

Have you not thought about other payment alternatives, like Google Checkout?
 
It is not only that its paypal. Its his good credit rating and all the advantages it can offer to the business if i was ever to need credit to expand . It would be a 90/10% split of the business with him being a silent partner. I've used google checkout and while it is ok as a secondary payment method, it does not integrate fully with my shopping cart software so i cant fully utilize all features.
 
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I'd still be cautious even then. If it's only capitol that he'd be for or too boost your chance of credit then I'd be looking at other ways to secure funding instead.

Have you checked your credit rating recently? There are companies which let you check it under a free trial and moneysavingexpert.com has tips on how to improve it as well. Could always look into this first before going ahead with a friend.
 
Use SagePay and forget partners.

Just looked at your post again. A poor credit rating shouldn't impact a business account as long as you don't require an overdraft or credit facility.
 
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Ed said:
Use SagePay and forget partners.

Just looked at your post again. A poor credit rating shouldn't impact a business account as long as you don't require an overdraft or credit facility.
Click to expand...

I already have a business account. Its a Merchant account i need and this is effected as i have already been rejected once.

Sagepay is who im planning on using however you need a merchant account.
 
Got a merchant acc through. Costco recently with no problems for mobile card terminals in the taxis iirc the only requirement was that we were
Members of costco
 
sanaxe1 said:
[...] 1 ) If i was to change to a Private Limited with both of us as Directors would my bad credit be taken into account if he was to apply for the account ?[...]
Click to expand...
Definitely - checks are run on all directors. At least, that was my experience [complete with sirens, red flashing lights etc].

You'd have to resign as a director but of course you'd keep your share [and ensure that everything is put in writing, naturally].

Though as others have said, it seems like a faff just to **** a snook at Paypal.

EDIT: wow, that's censored, huh? Narrow.
 
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sanaxe1 said:
I already have a business account. Its a Merchant account i need and this is effected as i have already been rejected once.

Sagepay is who im planning on using however you need a merchant account.
Click to expand...

Make sure you're on the electoral register and that either you've satisfied any CCJ's or are making regular payments to resolve any adverse transactions. Although your credit score may be low, they'll consider more than this when making the decision if you go back to them with a business plan and set of accounts. If it's crucial to the growth of your business, dig you heels in and keep trying. A recent client of mine setup a merchant account and she had CCJ's.
 
We use Paypal for our sites, I think it's really good and pretty much as cheap as any other payment method.

What don't you like about it?

Our other method is Worldpay, it's alright.

edit - The idea of letting someone else into the business just for this is stupid, there's nothing wrong with Paypal, if you want an alternative there is always Google checkout, but it's a pain in the arse to implement. Advice -DO NOT LET A FRIEND INTO YOUR BUSINESS FOR SUCH A TRIVIAL REASON. If you're business is doing as well as you say, give it a year or two and you'll be able to get credit.
 
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Whilst your personal credit rating may be a factor in some cases, a limited company has its own credit rating as it's a separate legal entity. I'm not sure what it's like now but when I got a merchant account you had to have a certain amount of trading accounts. That's why we went with Worldpay as you don't need that for their internet merchant account. Then we moved over to our bank merchant account later.

I don't think your plan is going to help your credit rating much.

Have you actually tried to apply for a merchant account?

That all said, personally I think it is madness to ditch Paypal. Customers love it and it is good to keep it as an optional payment method. Don't forget there are 230m+ accounts worldwide.
 
Paypal are a nightmare for using as a sole way of taking payments from customers online. It's only a matter of time before they come up with something to freeze your account at no notice. It doesn't matter how much business you put through the account so it is extremely wise to get a merchant account to get stability in payments if nothing else. Just google and the horror stories that come up from small business to large is just scary. Class action law suits are being started in the States.

If you're looking to get a merchant account you will want to be Limited Company. Being a sole trader is too much of a risk once you start looking towards these types of things. Being Ltd reduces your risk and makes things much better. You only need one Director and he /she can be the sole shareholder.

Your personal credit rating will be taken into consideration, especially if you are a new company.

Couple of questions you will be asked:

1/ Do you have much trading history? I.e accounts, trading history? Even if it's running accounts from sage or similar. If you haven't you will really, really struggle to get a merchant account.
2/ What types of products are you selling, what are you delivery times and who are your suppliers?
3/ Are you VAT registered?

Based on those questions you either get a yes or no, what conditions may be put on you (i.e settlement terms maybe extended to 2 weeks or more) or a higher transaction rate.

As mentioned try Sagepay, Paypoint.net etc.


If the above is not something you are in a position to do, then it will be best to get yourself Ltd asap. Get 6 months of trading under your belt (ideally 1 year draft accounts from an accountant, but 6 months may be enough) continuing with Paypal and then look to move to a merchant.


Good luck!
 
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I'm not sure what you do but what about companies like GoCardless.com? There are many many alternatives to taking payments.
 
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