High risk payment processing question

[Posiden922]

I’ve found someone to be the director on my behalf as I’m 16.

They have a credit score of 836, earn around 87,000 CAD a year, and maintain a consistent bank balance of 2,000 to 3,000 CAD, with 8,000 to 9,000 CAD passing through the account monthly, primarily due to investing a large portion of their income in stocks.

I understand that high-risk payment processors typically prefer to see a higher bank balance. Given this, I’m wondering what my chances are of being approved, considering that my business model involves selling in-game Roblox items and digital goods for a Roblox game I own and operate.

 

[Sols]

The director's own bank balance is irrelevant. What matters is how liquid the company is.

 

[EliasIT]

Only the payment processor can answer this question, however, as sols said, the companies credit score is relevant not the director. What can matter is if the director already signs for several other companies and merchant accounts or if the director is blacklisted / TMFed

 

[Posiden922]

The director's own bank balance is irrelevant. What matters is how liquid the company is.

My company was recently incorporated, and as a startup, I don't think it has much of a credit score in general.

When applying to payment processors, they request the SIN (tax identification number) of the director, along with the director's bank statements, and assess their financials at least, that's how it works in Canada.

I've been in contact with a few payment processors, and they all focus on the director's financials if a company is newly incorporated to assess the risk level.

 

[Sols]

If you haven't already, speak with Nuvei. They process for a lot of similar businesses. I can't remember ever experiencing them (in Canada or elsewhere) digging into the director's finances.

The credit rating of a director has no bearing on the company's obligations. It's not like they can claim money from the director if the company goes bust (unless the director was criminally negligent).

Is your director also acting as a shareholder maybe?

 

[Posiden922]

If you haven't already, speak with Nuvei. They process for a lot of similar businesses. I've never experienced them (in Canada or elsewhere) digging into the director's finances.

The credit rating of a director has no bearing on the company's obligations. It's not like they can claim money from the director if the company goes bust (unless the director was criminally negligent).

Is your director also acting as a shareholder maybe?

Yes the director is a share holder on my behalf (via bare trust and nominee agreement) since Im 16 years old

 

[Sols]

OK, that changes the story. Then the KYC is on the person in their capacity as shareholder, not director. In that case, the checks do make sense.

Even so, though, they're not asking how much money the person has as a form of collateral. It's simply a source of funds check, to make sure that the applicant has a reasonable background and financial means to start the business (i.e. isn't being funded through criminal means). The expected volume should also line up with the person's background and the business plan.

Just give them what they want and keep trying until you find someone.

 

[Posiden922]

OK, that changes the story. Then the KYC is on the person in their capacity as shareholder, not director. In that case, the checks do make sense.

Even so, though, they're not asking how much money the person has as a form of collateral. It's simply a source of funds check, to make sure that the applicant has a reasonable background and financial means to start the business (i.e. isn't being funded through criminal means). The expected volume should also line up with the person's background and the business plan.

Just give them what they want and keep trying until you find someone.

Thank you so much

I appreciate it a lot. Based on what I mentioned in my first message above, what do you think my chances are of being able to get approved?

 

[Sols]

Very hard to say without knowing all the details. Unless the person has a professional background somehow related to gaming or at least some form of tangentially related ecomemrce, it's going to look strange that they are suddenly starting a Roblox business. The KYC process should reveal that the UBO is a minor, which isn't necessarily a bad thing but it is unusual. So then you have two unusual things in your application. But it's more complicated than that because there's a trust and nominee agreement, so now we have three unusual factors about your business.

Roblox has a reputational problem in payment processing circles for underage gambling (Roblox casinos). Not saying your business is doing that, but it's a factor taken into consideration when determining whether to accept you as a merchant.

Is the nominee shareholder really necessary? I don't know which province or territory you're in, but IIRC minors can be shareholders in at least Ontario and BC. You'd still need to have an adult director and I think for tax purposes, any dividends paid out to you as shareholder become income for your parents/guardians. But maybe you've already researched that and determined you need a nominee shareholder.

Does the company have a bank account with any of the major banks? Can you get merchant services through them?

If you're having problem getting approved, one reason can be you lack history. It might be easier to start with PayPal, crypto, and Interac just to build some processing history.

 

[Posiden922]

I live in the province of Ontario. The nominee and bare trust agreement is intended to prevent any income or responsibilities from being assigned to the director acting on my behalf.

When I first registered my company, I had my sister act as the director and shareholder on my behalf, as recommended by my business lawyer and accountant to prevent any OSAP complication & Income complications.

When I applied to a payment processor, they stated they rejected me mainly due to high risk. The reasons they gave were that my sister's credit score was too new, and she had very little income and a low balance in her bank account, as she is a student. They never really cared/asked about the company’s structure.

As a result, I swapped the director to the one mentioned above in hopes of getting approved.

As for the business bank account, I have one with Scotiabank.

For my business, I own a Shopify e commerce site where I sell in game Roblox items (pets) for my Roblox game.

 

[cyprusbanker]

Try Durango merchant service, they have solutions for businesses in Canada!