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By ActivityPay
You've built an incredible rafting operation or multi-day hiking business. Your safety record is spotless, your reviews are glowing, and you're ready to scale. Then you apply for a merchant account and get hit with a rejection, a 10% rolling reserve, or fees that make your current processor look reasonable.
Here's what most adventure operators don't realize: underwriters aren't evaluating whether you run a legitimate business. They're calculating the statistical probability that you'll generate chargebacks, refunds, or payment disputes that cost the processor money. Your excellent reputation doesn't show up in their risk models—but your industry classification does.
Adventure tourism gets classified as high-risk for specific, measurable reasons: higher-than-average chargeback rates (industry average runs 1-2% compared to 0.5% for retail), advance bookings that create fulfillment risk, weather-dependent operations that trigger mass cancellations, and seasonal revenue patterns that complicate reserve calculations. Understanding what underwriters actually look for lets you present your application in ways that address their specific concerns.
Underwriters spend about 15 minutes reviewing your application. Most of that time goes to five specific documents that predict your payment risk profile.
Your statements from the past 6-12 months matter more than anything else in your application. Underwriters calculate your chargeback ratio (disputes divided by total transactions), refund rate, and average ticket size. If you're coming from Square or Stripe with a 2.5% chargeback rate, that's a red flag—even if every dispute was resolved in your favor.
What helps: Pull your processing statements and calculate these numbers yourself before applying. If your chargeback rate is above 1%, document why. Did you change your cancellation policy? Upgrade your booking confirmation system? Show the trend moving in the right direction. Underwriters care about trajectory, not just current numbers.
If you're a new business without processing history, your business plan becomes critical. Detail how you'll collect deposits, when you charge final payments, what your cancellation policy covers, and how you confirm bookings. The more specific your payment timing, the lower your perceived risk.
Underwriters read your terms and conditions looking for dispute triggers. Vague language like "weather-dependent" or "cancellations subject to evaluation" signals trouble. So does anything that contradicts standard booking practices in your industry.
Compare these two cancellation policies from an underwriter's perspective:
High-Risk Version: "Cancellations within 48 hours are non-refundable. Weather cancellations at operator discretion."
Lower-Risk Version: "Cancellations 7+ days prior receive full refund. Cancellations 48 hours-7 days receive 50% refund as trip credit. If we cancel due to unsafe conditions, you receive 100% refund or rebooking at no charge."
The second version reduces disputes because customers know exactly what to expect. It also shifts weather risk away from the customer, which dramatically reduces "didn't get what I paid for" chargebacks.
Document how you communicate these policies. Underwriters want to see confirmation emails, signed waivers, or booking page screenshots showing customers acknowledge terms before payment.
Three to six months of business bank statements show your actual cash flow, not your projected revenue. Underwriters look for reserve adequacy—whether you maintain enough balance to cover potential refunds and chargebacks during your peak season.
If you process $400,000 in bookings during June-August but your account balance drops to $15,000 by October, that's a problem. The processor sees fulfillment risk: what happens if weather forces mass cancellations in July and you need to refund $100,000 but don't have the cash?
This is why adventure businesses often face rolling reserves (the processor holds 10% of each transaction for 6 months). It's not punitive—it's insurance against seasonal volatility.
What helps: Maintain operating reserves during peak season. If you can show consistent cash balances of 15-20% of your monthly processing volume, you're demonstrating financial stability. Document how you manage seasonal cash flow in your application—equipment financing structured for off-season payments, owner investment timing, or deposit structures that smooth revenue throughout the season.
Underwriters review your actual customer experience, looking for friction points that generate disputes. They'll screenshot your booking page, read your confirmation emails, and check whether your terms are visible before payment.
Common red flags: No photos of actual equipment or locations (suggests misrepresentation risk), booking flow that doesn't show final price until payment page (leads to price disputes), confirmation emails that don't detail meeting locations or what's included (creates expectation mismatches).
If you're using booking software like Rezgo or FareHarbor, document that in your application. Established platforms reduce risk because they've already built in best practices for confirmations, reminders, and terms acceptance.
Operating licenses, insurance certificates, and business registration prove you're a legitimate operation with accountability mechanisms in place. Underwriters want to see general liability insurance (standard for adventure businesses) and any industry-specific certifications.
If you operate in multiple locations or run different activity types under one business entity, spell that out. Processing $800,000 through one merchant account for rafting, ziplining, and kayak rentals looks riskier than three separate businesses—but it's manageable if you document how you track bookings and handle cancellations for each activity type.
Rolling reserves confuse most adventure operators because they feel like the processor is holding your money hostage. Here's the actual math: if you face a 10% rolling reserve with a 180-day hold, the processor keeps 10% of every transaction for six months before releasing it.
In practical terms: you process $50,000 in June bookings, the processor holds $5,000 until December. In July you process $80,000, they hold $8,000 until January. By August, you've got $13,000 in reserves building up—money you've already earned but can't access.
Reserves aren't permanent. Once you've processed for 6-12 months with low chargeback rates, most processors will reduce or eliminate the reserve. But that first season is painful if you haven't planned for it.
The alternative is an upfront reserve—the processor holds a fixed amount ($10,000-$25,000) in a separate account. This actually works better for seasonal businesses because the amount doesn't fluctuate with your volume. You know exactly what's held, and once you establish your risk profile, you can often get it reduced after your first full season.
Application denials usually come down to one of three issues: chargeback history above 2%, insufficient business documentation, or processing volume that doesn't match your stated business size.
If you're denied, request the specific reason in writing. Most processors will tell you which risk factor triggered the decline. Address that issue directly with your next application.
Common fixes: If chargebacks are the problem, document changes you've made (new cancellation policy, booking confirmations, customer communication improvements). If documentation is insufficient, get your operating licenses and insurance certificates in order before reapplying. If volume projections seem inflated, provide realistic numbers based on your current capacity and bookings.
Timing matters too. Applying in March when you're projecting $400,000 in summer bookings but your bank statements show $15,000 in off-season revenue looks suspicious. Apply during peak season when your statements demonstrate actual volume, or provide detailed booking projections with deposits already collected.
Adventure businesses that get approved with favorable terms share common approaches: they document their risk management practices, show financial stability through seasonal cycles, and present clear policies that reduce dispute potential.
Before your next application, calculate your actual chargeback and refund rates, review your cancellation policy for clarity, and gather 6-12 months of processing history and bank statements. If you've made operational changes that reduce payment risk—better booking confirmations, clearer terms, improved customer communication—document those specifically.
The goal isn't to hide your industry classification. It's to show underwriters you understand the risks they're worried about and you've built systems to manage them.
Adventure businesses face higher-than-average chargeback rates (1-2% vs. 0.5% for retail), advance bookings that create fulfillment risk, weather-dependent operations causing mass cancellations, and seasonal revenue patterns. Underwriters calculate the statistical probability of chargebacks and disputes, not whether you run a legitimate business.
A rolling reserve means the processor holds a percentage (typically 10%) of each transaction for a set period (usually 180 days) before releasing it. For example, if you process $50,000 in June with a 10% reserve, $5,000 is held until December, which can significantly impact cash flow during your first season.
The five critical documents are: processing history (showing chargeback and refund rates), cancellation policy, 3-6 months of bank statements, website/booking flow documentation, and business formation documents (licenses, insurance, certifications). Underwriters typically spend only 15 minutes reviewing applications, focusing primarily on these items.
Calculate your chargeback and refund rates before applying, create clear cancellation policies that specify exact refund terms, maintain operating reserves of 15-20% of monthly processing volume, and document all risk management practices. Applying during peak season when statements show actual volume also helps demonstrate business legitimacy.
Request the specific denial reason in writing and address that issue directly before reapplying. Common fixes include documenting operational changes that reduce chargebacks, obtaining proper licenses and insurance, or providing realistic volume projections based on actual capacity and existing bookings.