As anindependent sales organization (ISO), you act as a third-party payment processor that helps businesses securely accept credit cards — typically through a partnering financial institution, such as a bank or larger payment processor.
Growing businesses often choose to work with ISOs because they receive more personalized attention. Processing payments through an independent sales organization can also provide better (or more cost effective) access to various merchant services and tools, ranging from POS terminals to payment integration to data security.
Sometimes referred to as merchant service providers (MSPs), ISOs earn money by keeping a portion of every sale they successfully process on behalf of their partnering bank. This revenue, known as “residuals,” is limited only by the number of clients that process transactions through your organization.
This guide explains how to become an ISO for merchant services so that you can start generating residuals as quickly as possible.
Steps for Becoming an Independent Sales Organization
Although the exact process for becoming an ISO varies depending on the industry, state and partnering bank, below are some of the most common requirements for those wishing to launch their independent sales organizations.
1. Write a Business Plan
Though technically optional, having a written business plan is arguably the most important step since it allows you to map what resources you have — and how much profit potential there is for your new startup.
2. Choose a Legal Structure
The next step involves choosing a legal structure for your ISO, with most businesses opting for one of the following:
- Sole proprietorship, in which you are the only owner of the business. This structure is the easiest to set up — but offers the least liability protection.
- General partnership, in which you join forces with one or more other owners. This can be structured similarly to a sole proprietorship, but some general partnerships are designed to shield the owners from liability.
- Corporation, in which the ISO is legally separate and apart from the owners (or shareholders). These are the hardest to set up, but corporations offer the most legal protection of all business structures.
- Limited liability company (LLC), in which the members own the business — while still enjoying a fair degree of legal protection.
3. Check Name Availability
Many states prevent businesses in the same niche from using similar names. Before designing a website or logo, it’s important to verify that your name is still available. You can do this by doing a Google search of “business name search” plus your home state.
4. Apply for an Employer Identification Number
Once registered in your state, you can apply for an employer identification number (EIN), which is the business equivalent of a Social Security number. You need this EIN to do everything from opening business accounts to taking out loans to managing payroll
5. Find a Payment Processor
With an EIN in hand, you’re ready to start looking for a payment processor. This is usually a bank or financial institution. You can also partner with other, more established independent sales organizations.
Each will have unique onboarding steps and registration fees. As part of the application process, you will also be expected to submit credit scores and financial statements to Visa, Mastercard and whatever other card brands your clients might wish to use.
6. Launch Your New ISO Business
The final step involves launching your business and going after leads. As a startup, it probably makes sense to handle as much as possible on your own. Once you become a merchant services broker with more clients than you can reasonably handle, you can start hiring agents to do more of the heavy lifting for you — i.e., chasing and converting leads to grow your business.
Becoming an ISO gives your organization an opportunity to experience a wide range of benefits, including the ability to:
- Serve almost every industry and handle transactions for smaller merchants
- Price merchants however you see fit, as you receive a buy rate vs. a revenue share
- Allow CardConnect to hold the merchant risk
- Offer a potentially larger breadth of products and services
Although becoming an ISO offers huge profit potential, it’s critical that you set your organization up correctly from the beginning. That’s because there’s a lot of scrutiny throughout the application process, with many aspiring ISOs being rejected due to sloppy or incomplete paperwork.
At CardConnect, we understand the complexities involved with becoming anISO for merchant services. That’s why we’ve designed our application process to be as streamlined and intuitive as possible. The sooner you get approved, the sooner you can start generating residuals to grow your business.
To learn more about how to become a registered ISO with CardConnect, schedule a free consultation with our merchant services team today.
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