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The Guide to Merchant Services for Small Business Owners

It makes sense why merchant services for small businesses include card processing terminals and technologies for online payment processing.

Stacy Handerson
2 years, 7 months ago

As many business owners come to find out sooner or later, the way to accept and process payment is a principal part of your daily operation. However, this gets a lot more complicated because you’re not taking cash payments and storing them in your cash register. There are many processes that occur behind the scene to make this kind of payment possible. That’s why merchant services for small businesses are so essential in today’s marketplace. 

Without these services, your small business cannot do business with the majority of the population in today’s tech world. Hence, merchant services for small business owners are some of the ways you can ensure you get paid at the end of the day. Whether you’re into credit card processing for online customers or accept mobile payments, there are different ways the kind of services you use affect your bottom line. 

Therefore, it is important that you know all you can about small business merchant services. The topic of merchant services is confusing, not because of it’s technical nature. Rather it’s because many small business owners do not take the time to familiarize themselves with the topic. Sure, there are other important things to consider, such as cash flow management. But it’s undeniable that you can’t build a business solely on cash flow if you didn’t know how the cash will end up in the account. 

So let’s find out more about merchant services for small business owners.

What are the Merchant Services for a Small Business?

The term merchant services are increasingly becoming broader. Generally, the term merchant services account for the technologies and services that small and big businesses alike use to process payments and accepting them too. 

This is a very vast definition. AS such, it can become challenging when you try to understand it from the point of a client. Because even though you might be a business owner, you need a shift in the mindset to fully understand merchant services and know-how they help your profit margin. 

Now, let’s dig deeper into merchant services and how they relate to a profitable small business. Here is how our break down goes: 

  • How merchant services operate
  • The tools needed
  • Small business merchant account providers

We believe that with the following information, you should be able to understand and use merchant services to the best advantage of your business. 

How Merchant Services Work

The way merchant services work for your small business depends largely on certain different factors. Some of these factors include the types of payments you accept, how you accept these payments, and the merchant account providers you choose to work with. Nevertheless, there are some fundamental processes in place that cut across different specifics. 

Hence, the process begins when you receive a credit card from a customer. And it ends with the approval of the merchant service providers. In this case, cash payments do fall within the category of merchant services. After all, you should require any type of third-party service to accept cash payments from face-to-face customers. Especially knowing that these services come at extra costs. 

Having stated this fact, it makes sense why merchant services for small businesses include card processing terminals and technologies for online payment processing. In essence, the moment you swipe a card, you’re relying on your merchant service provider to get you paid. They take care of all the processes that go on behind the scenes. 

Nevertheless, we can simplify the behind-the-scene process to this:

The payment processor denies or accepts the information from your termination by checking it with the customer’s issuing bank. 

Upon approval, your terminal accepts the payment which completes the purchase process

Once, the purchase goes through the above process of approval and completion, your payment processor deducts their fee and the remaining funds are deposited into your merchant account (we’ll discuss small business merchant account later). 

Again, this is a simplification of the entire process. You’ll find the real process much more complicated with several financial institutions playing their part to make a single transaction possible.

Merchant Services Products

merchant services for small business

As earlier mentioned, much of what you’ll get from your merchant provider depends on the needs of your business. Hence, the essential tools needed to operate your business’s payment acceptance are also the products your merchant providers offer you. The aim here is to find services that work both for you and your customers. 

Below are some of the essential products you need from merchant services from small business operations. 

Payment Gateways

You’ll need the payment gateway if you plan to accept online payments for your business. This product is very accessible through your merchant service provider. In essence, your payment gateway is a software written to enable your website or eCommerce store to accept and process card payments securely. 

It is what you’ll have in place of a credit card terminal if you’re operating an online business. Many times, it only takes a payment gateway to keep away credit card fraudsters. 

Credit Card Terminals

For those accepting payments in physical business locations, chances are, you’ll require a credit card terminal. The credit card terminal is a physical device the enables merchants to tap, dip, or swipe a credit card. As earlier explained, your merchant service provider would connect with your POS cash register and credit card terminals. 

As many merchants will agree, this piece of hardware help you take, verify and also get paid through the different credit or debit cards. The shapes and sizes of terminals can vary greatly. You could either get a handheld terminal or a simple magstripe. 

Point of Sale Systems

Also, the POS system and credit card terminal could be part of the same system. Typically, your point of sale system consists of two parts. These are the hardware and software components. Together, these two enable you not only to accept and process payments through your merchant account service provider. The system also helps you to streamline your business’ entire operations. 

Some of the main things you can do with your POS system include employee management, inventory tracking, customize sales reports, accept payments, reconcile commissions and tips, among many others. Usually, many people use “point of sale” and merchant services” are used synonymously because it contains everything small businesses need to process payments and manage their sales. 

Difference Between Merchant Cash Advances and Merchant Services

As most merchant cash advance providers would tell you, merchant cash advances aren’t necessarily part of the products you’d get from merchant services. However, it’s undeniable that merchant services and merchant cash advances are intertwined in many ways. As many merchant service providers would have it, you would need merchant services to get access to merchant services cash advances. 

Merchant Account Providers

Merchant account providers are the main players at the heart of merchant services for small business payment processing. These are third-party companies that offer the necessary financial services like those mentioned above. In essence, if you’re a small business owner, you’ll have to select an ideal payment processing company if you want to give your customers the opportunity to choose a variety of payment methods. 

They provide the tools, products, and experts necessary for small businesses to cope with the fast-changing cashless society. 


So what would you have to take the most critical note of in merchant services for small business payment processing? Well, the merchant services industry isn’t a simple one. Things are evolving very fast and there are many trends merchants have to consider if they want to remain competitive. Hence, recommend following this blog to learn all about payment processing both online and offline.