The National Association of Credit Managers (410-740-5560) offers educational programs, trade references, seminars, and publications. It will send you a free brochure of its services. Laura Smearman, director of publications, recommends The Art of Business Credit Investigation (Advanced Verification Service, 1991, 612-469-3196, $26.50), by Peggy Mound. It explains how to collect and verify credit information and includes an exhaustive list of resources.
More than 1,400 credit-reporting agencies offer more detailed information. Nearly all of them tap into the vast data banks of the three nationals: TRW, in Orange, Calif. (714-385-7000); Trans Union, in Chicago (312-258-1717); and Equi-fax/Credit Bureau, in Atlanta (404-885-8000). After paying an annual fee of $75 to $120, a member can get -- for a flat rate of $10 to $20 each, depending on the bureau and the company in question -- reports detailing items of public record; account activity; payment and loan histories; and tax liens.
TRW offers attractive rates for large volumes. If a client purchases at least 175 credit reports per year, TRW will charge roughly $17 per report. If you prefer to pay as you go, look into TRW's Business-to-Business Credit Report Service. (See "Dialing for Data," No. 03921092, March 1992.) For a $28 phone call (900-884-4879; or call 800-676-2879, and the charge will automatically be billed to your credit card), TRW will fax or express mail a company profile including bill-payment history, federal-government activity (such as Small Business Administration loans), Standard & Poor's financials if the company is publicly held, and the highest amount of credit extended to the company.
* * *
Taking Credit
I'm about to start manufacturing an electronic device for car stereos, selling it through mail order. Because I have no storefront and little capital, banks won't give me a merchant credit-card account so I can accept charge orders. What can I do?
Daniel Sherron
President
Amprotector Systems
Altamonte Springs, Fla.
Fly-by-night companies can process a fortune in orders, never deliver, and disappear. Banks especially fear a mail-order start-up entrepreneur who doesn't own a home and hasn't set up a retail store, either of which would make a start-up look more permanent. Also, banks fear getting stuck with charge-backs when customers refuse to pay. Your high-priced product, and the specter of big charge-backs, must worry them. As Pamela Kelley, CEO of Rue de France, a mail-order retailer of French lace in Newport, R.I. (an Inc. 500 company in 1988 and 1989), says, "No one steals credit cards to buy lace curtains, but people do to buy stereo equipment."
Even so, Kelley had trouble getting an account when she started, in 1982. She suggests you try local banks "where there's still a human being in residence." And before you accept no for an answer, ask for the bank's criteria. A bank may, for instance, accept a home-based merchant who owns the home or who will place money in a certificate of deposit at the bank.
Dave Fokos, president of Icon Acoustics, in Billerica, Mass. (see "Sound Strategy," No. 05910461, May 1991), paged through the phone book until he found a cooperative small bank. When that bank failed, he searched and found another one. That one was taken over by a bank that didn't want to handle merchant accounts. Now Fokos has contacted an independent sales and service organization (ISO) to see if it can set up a better relationship.
An ISO sells merchant accounts for banks. The bank still handles the account and assumes the risk. Merchants pay a fee to the ISO on top of the bank's fee. That's not all they pay. Some ISOs make money by renting terminals to merchants. Terminals should cost less than $300 to buy, but some ISOs gouge merchants, renting terminals for thousands per year.
Unscrupulous ISOs have signed up mail-order businesses, then misrepresented them to the bank as retailers. When the bank finds out the truth, it terminates the account, blackballing the merchant. Meanwhile, the merchant is locked into the expensive lease for the terminal. Before signing with an ISO, check its lease provisions carefully, and ask clients if they're happy with its service.
Desperate start-ups sometimes ask established companies that have merchant accounts to process transactions for them, although Visa and MasterCard regulations, and some states' laws, prohibit it. Its cost -- perhaps 8% of the billings -- may also be prohibitive.
For $350, Larry Schwartz's National Association of Credit Card Merchants (407-737-7500) matches mail-order clients with friendly banks. Schwartz says that if a client meets his requirements, "we'll never turn our back on it." But he doesn't guarantee he'll find a match or how much you'll have to pay a bank.
John Cali, a business-resource publisher who sells by mail order, has written a 50-page booklet, Strategies for Getting Charge Card Merchant Status at Your Bank (800-392-9445, $21.95). The booklet makes a good introduction for people who have just butted their heads against banks' reluctance.
If nothing works, Kelley suggests you place your product in a kindred catalog and let the catalog company worry about credit-card orders. Grey House Publishing, in Lakeville, Conn. (203-435-0868), publishes a $135 directory of mail-order-catalog companies.
-- Reported by Michael P. Cronin, Christopher Caggiano, and Karen E. Carney n
