Lenders typically classify a business loan as high-risk because of two reasons: the borrower is running a high-risk operation, or they have bad credit. While either of these can make it very hard to get a loan, the situation becomes extra tough if you tick both boxes.
Whichever the reason, when your business is labeled high-risk, your solution for funding will likely not come from a traditional bank loan.
Getting a high-risk business loan
High-risk dealers generally find it easier to acquire funds through other means, but if you’re insistent on getting a business loan, it’s not impossible. You can find a small bank or independent lender, who will hear your story and maybe approve your request.
However, these loans often attract a lengthy vetting process, high interest and a short repayment period. The good news is, once you make it a habit of paying your loans on time, the bank might eventually consider softening its stance.
Alternatively, you could reach out to a web-based lender, especially if your target amount is small. Microloans are preferred by high-risk business owners because they are easy to get and easy to pay. Moreover, frequently remitting to a microlender on time will gradually improve your credit score.
Depending on how risky your business is, finding an accommodating high-risk lender can be a frustrating endeavor. It’s, therefore, important to weigh your other options.
For instance, experts recommend cash advances to high-risk merchants, particularly those with steady sales. Unlike a loan, where a lender gives you money and expects it back at the end of a set period, a cash advance is somewhat like a trade between you and the provider.
When you request for an advance from a high-risk financier like First American Merchant, you’re essentially selling your future credit card sales for the money you presently need. The provider will then proceed to take small chunks of your individual sales until the loan is serviced in full.
Cash advances for merchants with bad credit
Advances are favorable for businesses with poor credit scores. They are easier to get than loans because rather than demand proof of good credit, a provider will request a show of good sale records.
Furthermore, acquiring a high-risk business loan puts additional weight on your credit, and any late payments will make things worse. However, a cash advance is directly paid by card sales, which means there’s no such thing as a late payment.
Funding a high-risk business can be hard but, thankfully, business loans are not the only choice you have. Don’t waste time with banks who will probably not give you any attention.
Instead, reach out to small lenders and independent cash advance providers, and get your business back on its feet.