Most aspects of starting a firearms retail business are the same as other retail businesses and are relatively easy. Generally speaking, you need the appropriate licenses and certifications, products to sell, and a way for your customers to see your products and make a selection. There is one more thing that all businesses need: a way to accept payments from customers. If you will be accepting payments by credit/debit card, that means getting a merchant account. Let’s take a look at three things you need for a firearms merchant account.
Before anything else—and to operate your business legally in the first place—you need a Federal Firearms License (FFL). FFLs are issued by the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) and are required to manufacture, import, or otherwise be “engaged in the business of dealing in firearms.”
The factors that are considered when determining whether you are “engaged in the business” include “whether you represent yourself as a dealer in firearms; whether you are repetitively buying and selling firearms; the circumstances under which you are selling firearms; and whether you are looking to make a profit.”
Also keep in mind that there are multiple types of FFL, including three for dealers, three for manufacturers, two for importers, and one for collectors. A variety of information and other resources are available on the ATF website. Failure to fulfill legal requirements could have serious consequences, so ask as many questions as necessary to make sure that you are in strict compliance with the relevant laws and regulations.
Even when operated in perfect legal compliance, firearms businesses are considered to be high risk, and it is unlikely that a traditional bank will provide you with a merchant account. If you are not doing business legally, no legitimate bank or other payment processor will even consider accepting your business as a client.
Note: In addition to federal laws and regulations, individual states may have their own gun laws. Be sure to understand and be in compliance with the laws and regulations of all states in which you will do business.
There are generally two options for getting a merchant account. One is to go to a traditional bank. The other is to go to a payment processing firm. When it comes to firearms businesses, each of these options can be divided again, based on the organization’s degree of willingness to do business with high-risk businesses. In other words, there are banks that are willing to provide services to firearms businesses and banks that are not. Similarly, there are payment processors that will take on such high-risk merchants as clients and processors that will not.
You could try applying for services at banks, etc., that are reluctant to provide your business with services, but even if you are successful at opening an account, the conditions will be strict, and it won’t take much to get your account closed suddenly. It’s the kind of “successful” that doesn’t feel too terribly successful.
Your best option—and possibly your only realistic option if you can’t find a bank willing to give you an account—is likely a high-risk payment processor.
In general, high-risk payment processors specialize in matters related to the processing of credit/debit card payments for businesses in industries that are considered to be high risk. The reasons that businesses are considered to be high risk tend to be a high chargeback rate and a high occurrence of fraud. Chargebacks and fraud risk are basics for high-risk payment processors, but individual firms may have their own specialties as well.
One benefit of the knowledge and experience that brings is that a high-risk payment processor can help you reduce the risks that make your business high risk. Those risks have the potential to cost your business a lot of money. It’s important to implement measures to eliminate risks when possible, and to minimize the negative consequences when not.
Matters related to the sale, ownership, and possession of firearms can be contentious. Despite codification of the human right to possess firearms in the U.S. Constitution, there continue to be factions that work to enact legislation that severely curbs, or even prohibits, the exercise of that right. Both sides of the issue and people all along the spectrum in between can get very emotional about it. The result is volumes of federal, state, and local laws and regulations. This is complicated by the unstable and often ambiguous nature of those laws and regulations.
There also continue to be cases in which firearms manufacturers and dealers are blamed for the actions of individuals who have committed crimes using guns purchased from the manufacturer or dealer. In some cases, it is limited to pockets of public outcry, but at times it actually ends up as a matter of civil or criminal court proceedings. Whether holding a merchant accountable for the actions of a customer is reasonable/rational or not, the reality is that firearms merchants, as well as banks, etc., that provide those merchants with payment processing services, face the risk of negative public opinion and legal problems.
Once you have obtained the necessary licenses and certifications and found a high-risk payment processor that is familiar with the firearms industry, it is vital that your business continues implementing measures against risks. It is also important for you to monitor societal and legal changes related to firearms and revise your measures to handle those changes.
The combination of common risks, such as chargebacks and fraud, and risks unique to the firearms industry, such as legal action related to the actions of customers, can require a lot of time, effort, and resources. Fortunately, a high-risk payment processor such as Zen Payments can help you to alleviate that burden.
We specialize in payment processing for high-risk industries and understand the payment processing needs and challenges of the firearms industry. We have the experience and expertise necessary not only to get you a merchant account, but to help you do what is necessary to keep that merchant account, while also making the payment process easier for your customers and for you.
When choosing a high-risk payment processor, be sure to ask as many questions as necessary until you’re satisfied with the responses and clear on what you can expect and what will be expected of you. Our team at Zen Payments would be happy to speak with you and find ways to help your business prosper, so please don’t hesitate to contact us.