Contrary to popular belief, starting a new business when the economy is struggling isn’t always a bad idea. In fact, during the worst economic downtown since the Great Depression, more than one million new businesses set up shop in America. What do these business owners know that the rest of us do not?

During the darkest days of the recent recession, 627,000 new businesses opened in America. The year was 2008 and the total number of new business opening was on the rise, according to the Small Business Administration’s Office of Advocacy. However, we still haven’t answered the question: Why is it better to start a small business during a recession?

The truth is that it isn’t. New businesses will invariably have a harder time finding loyal customers when the economy is unstable or in decline. However, they may be able to rent office or commercial space for a lot less because property owners may be desperate to find new tenets. Business loans also become more attractive when the economy hits the skids.  But the number one reason why new business openings have increased is that Americans love a challenge. After all, if their business can survive a recession, imagine how well it will do when the economy inevitably rebounds. Where to begin?

The customer should always be a business owner’s first priority. This goes double when the economy is unstable. Shoppers will be looking for value and they will appreciate and remember any business that offers it to them. The modern shopper always expects multiple payment options, especially when times get tight.

When families are forced to stretch their monthly budget, they may have to rely on credit cards. Most families pay their bills by check and then decide later which purchases they can afford to pay for with cash. If they are running low, they may have to use a credit card to buy groceries or school supplies for the kids. When a business does not accept credit cards, they alienate a large segment of the population, especially during a recession.

Why do some companies refuse to process plastic payments, i.e., debit and credit cards?  Because it costs them money each and every time they do. A business owner must obtain something called a merchant service account if he wants to accept plastic. These accounts are offered by banks and other financial institutions.

As the name implies, these institutions offer several essential services. First and most importantly, they check to see that the card is valid. If it is, they will approve the transaction and send a bill to the customer’s credit/debit card company. Once the requisite funds are received, they will deduct a certain amount for service fees before they deposit the remainder in the merchant’s bank account. The entire process takes one to three business days.

What are the benefits?
As we mentioned, some consumers can only afford to make a purchase if they are paying with a credit card. If asked to pay with cash, they might simply forego the item for something they need more. Customer surveys also confirm that shoppers appreciate it when merchants provide them with additional payment options, which means that they are more likely to return. It is no surprise that many merchants report an increase in repeat business shortly after they start accepting credit/debit card payments.

Customers also spend more when they pay with plastic. The average credit card purchase is around twenty dollars higher than the average cash sale. Once again, this has everything to do with the fact that sometimes people are forced to live beyond their means. Sometimes they simply cannot afford to buy more groceries or clothes for their kids. But if they can borrow money from the credit card companies and pay it back when the economy improves, they will.

Unlike credit cards, debit cards do not rely on borrowing. They are check cards that are tied to a customer’s bank account. It may surprise you to learn that the debit card is more popular than the credit card. Debit cards are as convenient as credit cards, but they do not charge interest. They also shield customers from ATM fees.

Cash only businesses have become an endangered species. The modern customer wants and needs multiple payment options. Car washes, diners, and barbershops can afford to ask for cash because the products and services they offer are inexpensive and their customers understand that accepting plastic would hurt their bottom lines. But any company that sells more expensive products and services must accept debit and credit card payments, especially in a troubled economic environment.

In the end, the costs of merchant services pale in comparison to the potential benefits. Find the best merchant service account for your business now.

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