Thursday, March 28, 2024

How to become an ISO

An independent sales organization (ISO) works with banks to provide credit card services. Most commonly, ISOs work to sign up merchants for the bank.Essentially, you are the independent sales force banks will use when they don’t want to use their own internal staff. To become an ISO, you must form your business structure with your county and acquire all necessary licenses and permits. Then you must find a bank to sponsor you and submit a detailed application. Make sure you read the contract carefully and confirm that becoming an ISO is a sensible financial decision.

Pick a business name.

Your business must have a unique name. You should choose something that is memorable and that suggests the services you provide. “Credit Connectors” or something similar might work well.
Remember not to use another business’ trademark or service mark in your name. Visa and MasterCard are service marks, and many banks have obtained trademark protection for their names. Accordingly, don’t call your business “Visa Helpers” since that is illegal.

Choose a business form.

Your business must have a certain form or structure. For ISOs, the most common are corporations and partnerships, but you could also form a limited liability company. You should compare the strengths and weaknesses of each form. Consult with your business lawyer for more information.

Obtain necessary permits and licenses.

You need a business license from your county before you can begin working. You may also need additional licenses or permits. What you need will differ by your state.

Register to pay taxes.

You need to register with your state and possibly local government to pay taxes. Contact the appropriate office and ask. They should have a form for you to fill out. Also find out the schedule for paying taxes.
You’ll also need Employer Identification Number (EIN).

Draft your business rules.

Unless you’re a sole proprietor, you’ll need a set of policies in place that describe how to run the business day to day. This document will differ depending on your business form. However, they typically cover similar topics, such as how profits and losses will be allocated between owners and how meetings can be called.

Create a business plan.

A member bank will want to see a business plan before sponsoring you. Also, if you need financing, then a lender will want to see a business plan as well. There are several different types of business plans.

Find a member bank to sponsor you.

You won’t work directly with Visa or MasterCard. Instead, you will work for a bank that is a member of either credit card association. Multiple member banks may sponsor you, so you don’t have to limit yourself to only one. Banks are typically members of both associations.
Call up banks and ask if they will sponsor you. You should start locally and visit their website first.
Some banks don’t sign up ISOs. Instead, they’ll make you go through a Member Service Provider.

Gather required documents.

You also need to submit a considerable amount of paperwork to the bank. Pull this information together ahead of time, so that you will have it available when you submit your application;
– two years of financial statements for the business or personal tax returns for all principals
– personal financial statement for each principal in the business
– your Articles of Incorporation or partnership documents
business plan
– sales materials and solicitations
– list of current ISO agents and employees

Check your credit history.

All principal owners will have their credit checked to confirm that you are responsible with credit. Before the application process, you should probably look at your credit report. Correct any errors that you find.

Analyze your contract.

You should read your sponsorship agreement carefully and use an attorney to help you. These contracts can be confusing, and often there are hidden clauses that don’t work to your advantage.

Create a website.

You’ll want a web presence so that prospective clients can find out more information about you. If you can afford it, hire someone to design a professional looking website. If you can’t afford help, then look for businesses that sell domain names and templates you can use to create a basic website.

  • Make sure your domain name is your business name.
  • That will make you easier to find.
  • Remember that your sponsoring bank must be displayed on your website.

Hire sales agents.

You can hire agents to work for you, although you don’t have to. They must only represent you and not their own business. You should find people with prior sales experience.
You might want to hold off on hiring agents until your business is really booming. Sales agents typically get a cut of each transaction, so that will lower your profitability.

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