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Best Payment Methods For Sole Traders

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Last editedApr 20232 min read

In simple terms a merchant account is a form of bank account that enables a business to accept and process payments by debit and credit card. Clearly, any sole trader wishing to thrive in the 21st century is going to need an account of this kind in order to take payments from their customers. This is particularly so given more people are switching their spending to cashless methods, and even the smallest sole traders find themselves, thanks to ecommerce, selling to customers around the globe. 

Am I too small for a sole trader merchant account?

Many sole traders worry that they may be too small to warrant the services of a merchant account, or that their self-employed status will make it impossible to set one up. From the point of view of the banks offering these services, however, these concerns make little sense. The sheer number of sole traders in a country like the UK, for example, means that any banks refusing to offer merchant accounts would be passing up considerable profits. 

In simple terms, the merchant account holds customer payments while they are being approved by the customer’s bank, before passing them on to the merchant’s bank. The charges for providing this service are what motivate banks to offer merchant accounts to even the smallest sole traders. 

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Factors that impact on a sole trader merchant account

The banks that provide merchant accounts are looking for safe investments, so a firm trading history and good credit record will always help, as will the ability to present a promising vision for future trading. The size of the business may not impact on the provision of a merchant account, since a badly run large business is far more likely to fail than a well-run small business. And merchant account providers are well aware of the healthy profits generated by many sole traders.   

Where to go if you need a merchant account? 

The following banks and payment gateway providers currently accept sole traders for merchant accounts: 

  • High street banks such as Lloyds, Barclays, HSBC and Halifax

  • Online providers such as SagePay and PayPal

How to establish a sole trader merchant account

There is generally a standard application process for establishing a merchant account for your sole trader business. The bank or payment gateway will need to know several things about you as an individual and your business. Among the information that the account provider will need to access is the following:

  • Up-to-date business accounts

  • Past turnover and predicted future turnover

  • The details of any suppliers you rely upon

  • Information about the markets in which you operate

This is by no means an exhaustive list. The precise details will vary from provider to provider, but it gives an idea of the kind of detail that merchant account providers are looking for. If the business in question is too new to provide the historic information – such as past turnover – then they may ask to see a detailed business plan.  

The features offered by a sole trader merchant account

A merchant account will enable any sole trader to expand their business, reach more customers and compete with larger concerns. Among the features offered by many sole trader merchant accounts are the following:

  • PDQ machines

  • Online software

  • Financial assistance

A business – or business owner – with lower earnings or credit ratings may still be able to establish a sole trader merchant account, but may find themselves, initially at least, paying more for the service. This could take the form of a higher monthly fee or slightly higher costs per transaction. 

We Can Help

If you’re interested in finding out more about sole trader merchant accounts, or any other aspect of your business finances, then get in touch with our financial experts at GoCardless. Find out how GoCardless can help you with ad hoc payments or recurring payments.

Over 85,000 businesses use GoCardless to get paid on time. Learn more about how you can improve payment processing at your business today.

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Interested in automating the way you get paid? GoCardless can help

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