When you need cash for your company or business startup, your first thought is probably to apply for a business loan at your local bank. However, when your get there, you might have been surprised to find out that they are unwilling to work with you. You have all the necessary paperwork and a strong business plan, so why have they closed the door in your face? After asking a few more questions, you find out that your business is considered “too risky”. What is a high-risk business, and what does this label mean for your business funding needs?
What is a High-Risk Business?
There are various reasons why a lender might label your business ‘high-risk’. Some of these reasons are superficial factors based on your business’ industry or clientele. Other reasons are directly related to the merchant’s business practices. The following list includes some of the most common factors that might push your business into a “high-risk” category:
- You have been added to the terminated merchant (TMF) “blacklist”, meaning your business has lost its previous merchant processing account because of excessive chargebacks.
- Your business’ industry is known for high chargeback rates and high-volume sales.
- You provide subscription-based products or services.
- You are an international merchant or do business in countries with high chargeback risk (e.g. Canada, Australia and the European Union).
- You have bad credit, a past bankruptcy or tax lien.
- Your business is a startup with insufficient operating history.
What ‘High-Risk’ Label Means for Your Bottom Line
Without sufficient working capital, your business will be unable to maintain positive cash-flow for day-to-day expenses; such as, paying employees, purchasing equipment, increasing inventory and funding marketing campaigns. Big plans for expansion and growth will be completely out of the question. Additional capital is also required for a business to set aside a cash cushion to weather slow business periods. Having a ‘high-risk’ label can make it hard – if not impossible – to find traditional business funding that does not involve high processing fees (that will affect the bottom line).
Where to Find High-Risk Business Loans
If your business is ‘high-risk’ and you are unsure of where to find affordable funding, consider working with a high-risk provider. As a high-risk specialist, First American Merchant has years of experience in offering business funding, payment processing services and chargeback protection to a long list of business types and industries banks refuse to work with. Automotive, beauty salons, construction, doctors, retail, dentistry, trucking and restaurants, to name a few.
FAM’s most popular business funding option, the merchant cash advance, allows your business to sell a portion of future credit card sales in exchange for quick cash. Approval for a merchant cash advance is based on your business’ performance, rather than personal credit, time in business or financials. Thus, this financing option has a high approval rate.
- Credit Scores Below 500 are Approved
- Receive Your Funds 72 Hours from Application
- Simple, Flexible Programs
- No Tax Returns or Financials Required
If you would like to learn more about high risk business loans, contact the team of experts at First American Merchant for a free consultation.