Banks Can’t Reject Your FFL Business After This

It can be hard to get the green light from the banks and processors you need when it comes to a FFL business. The label of “high risk” when it comes to fraud and legal issues seems to slam every door closed. But there is a trick to getting the support you need. Once you know it, banks won’t be able to reject you. What is it? 

Let’s dive in.

Understanding the Challenge of FFL Business Banking

Did you know that 39% of small businesses are more than $100,000 in debt? It’s true that you need to have money to make money. In this day and age, if you run a small business, you need the help of banks and lenders. You may need a small business loan in order to get your business off the ground, and eventually you’ll need a payment processing service as well. The same is true for Federal Firearm License (FFL) businesses. However, bank standards for risk tends to become an issue when getting approved for loans or payment processing. 

This is particularly true when it comes to online purchases. Cybersecurity risks are something that banks especially tend to focus on: the risk that customer data could be stolen from gun retailers to fund more fraudulent purchases. In fact, 96% of community bankers identify cybersecurity as an “extremely or very important” risk when it comes to the business clients they choose to work with. 

Why Banks Hesitate to Support FFL Businesses

Any small business might need banks to survive, but FFL businesses tend to have a hard time getting banks on their side. In fact, major institutions such as Citibank, Bank of America, and JP Chase Morgan, all have policies restricting services to the firearms industry. Why? There are a few reasons.

The first barrier for FFL business banking is that gun retailers are considered “high risk” by most banks and lenders. There is a high risk of fraudulent purchases, a high risk of chargebacks and disputed claims, especially with online purchases. 

Political sentiments may also impact whether or not a bank chooses to support FFL businesses. Guns are a highly divisive topic in our country, and some bank CEOs may make decisions on the businesses they support based on their own feelings or the feelings of their shareholders. 

To make matters worse, the current rights of FFL businesses when it comes to business banking are thinner than they should be. The SAFER Banking Act does little to prevent discrimination against firearm businesses and may even promote de-banking these businesses. As it stands, 75% of gun dealers in Texas have reported facing financial discrimination. However, the Office of the Comptroller of the Currency (OCC) has proposed a rule to prevent banks from denying services to companies based on political considerations, so we may see a change in this direction. In Texas, the Fair Access to Banking Act aims to grant the same rights to lawful businesses such as firearms businesses.

Strategies for Overcoming FFL Business Banking Obstacles

So what are the steps you can take to avoid being rejected for FFL business banking loans? It can be a challenge with so many barriers in place for firearms dealers, but here are a few strategies you can employ:

• Prioritize In-Person Interaction. In a 2024 survey by the FDIC about small business lending, almost all banks reported that in-person interactions were the best for developing relationships with the small businesses they lend money to. Although there are a number of financial technology resources to handle lending digitally, in-person still tends to give you the best chance at success.
• Seek Out Support and Advocacy. Find support from advocacy groups who can help you enforce your rights while seeking a small business loan. This does not only apply to FFL advocacy groups. For instance, research shows that Black-owned businesses are less likely to access credit from a bank compared to white-owned businesses. If this is another barrier for you, consider looking for advocacy groups that support Black-owned businesses.
• Look To Other Successful FFL Businesses. If you know of other successful FFL businesses, take a look at how they may have received their funding. Ask the owners of those businesses how they did it. This can help to set a roadmap for you.
• Find FFL Friendly Lenders. There are lenders who prioritize high-risk merchants or even FFL merchants. Do your research beforehand to make sure that these lenders don’t charge you exorbitant interest rates as punishment for being “high risk.” But finding a lender who understands the firearms industry can be a boon.

Getting Started with BKW Servicing

BKW Servicing specializes in providing merchant account services to “high risk” merchants, which makes us the perfect partner for your FFL business banking. We have formed relationships with over 20 banks and processors. This allows us to curate the perfect processing solutions for each client. With our help, you can get the support your business needs. Contact us today to learn more or to get started.