Small Business Loans for High Risk Industries

Getting a small business loan for a business in a high risk industry is often a very difficult thing to do for many people. The reason for this is that since it would be a high risk loan, there would be very few people willing to lend money for it. However, this does not mean that it’s impossible. By simply following a few simple steps, you can increase your chances of getting the loans you need to either star r expand the business. It might take a bit more effort compared to getting a loan for any other type of business, but simply having a logical approach to things would make it a lot easier. Some of the most important steps you need to follow in order to get this done include:

Come up with a business plan

Why do you need the loan in the first place? In all cases, this is the most important part of the loan application process, and getting things wrong at this stage means that your chances of getting it would be drastically reduced. By the time you decide that you need a loan, you should have a very clear idea of how much money you need, how you are going to spend it and how you plan to repay it. It’s also a good idea to do a market analysis to show that your plans are compatible with the events in the industry.

A well-developed business plan is always very easy to spot, and will inspire confidence in whoever you are getting the loan from. If you have never come up with such a plan before, it would be a good idea for you to get some information on how to draw one up. You could even hire a business expert to help you with the process, so that you don’t end up having a difficult time doing this. In the end, you will find it to be one of the most effective ways of increasing your chances of getting such a loan.

Identifying the right type of lender

In addition to that, you also have to make an effort to identify a lender who would be interested in funding a business in this type of industry. There are some lenders who are more comfortable with taking up high risks, and they are the best to work with. Of course, if you have a solid plan on how you intend to use the money, you could consult other types of lenders as well. However, the problem is that they will often need a lot more convincing before giving you the money.

As long as these two issues are kept in mind, you will have a high chance of getting a business loan for any business in a high risk industry. Of course, there are other things you might need to keep in mind in addition to the above, but you should never neglect these two. It often saves you a lot of time and effort in the long run.

Small Business Lending for High Risk Industries

Although you are operating a very successful business, have ever wondered why your business loan request is always declined? Lending institutions may view your business as high risk or restricted industry. A business is considered a high risk based on 2 accounts; the risk of financial failure exists and it is undoubtedly high, and it operates within a high risk industry. Either one or both conditions might apply. The first condition addresses your business' viability (sustainable profit), while the second condition addresses safety and health concerns. However, the two conditions might affect the ability of your business to acquire loan. Some of the high risk industries include:
Agriculture and forest products
Courier services
Travel agencies; recreational vehicle or boat sales
Software related services.
Convenience stores (commonly known as C-stores).
Entertainment (adult entertainment is considered restricted)
General contractors
Healthcare; specifically assisted living facilities, nursing homes, and continuing care retirement centers
Limousine services as well as hotels or motels
Jewelry, precious metals and stones; wholesale and retail
Long distance or over-the-road trucking
Real estate agents/brokers
Taxi cabs (such as the purchase of cab medallions)

Bad Credit Makes You a High Risk Borrower

Your credit score can also make your company a high risk business. Lenders especially the more stringent financial institutions such as banks will look at your credit scores before giving out loan. Although at times it is prudent to push off creditors in order to keep your business running, creditors will classify your company as a risk business if you default loan repayment.
What is the way out?
If you are operating a small business in high risk field, you can apply for high risk small business loan. Most business choose to apply for high risk loans because they have exhausted other options, such as factoring their accounts receivable or applying for bank loans. In most cases, it is easier and more appropriate to apply for high risk loan than to pursue any other option.
The best part with high risk loan is that you will receive funds immediately. High risk loans can be very beneficial when you are trapped for cash and you need money for your business to run effectively. The other benefits of high risk loan are there is no long term commitment to the lender. Generally, the term ranges between 3 to 18 months. You can use the loan to provide relief to short term business problems.
If you are in a high risk industry, you can always get loans from high risk small business loan.

The Best Sources Of Loans For Your High Risk Small Business

The ability of your business to acquire financing is largely determined by the risk associated with operating it. Your business is classified as high risk if it operates in a risky industry or has a poor credit history. Risky industries demand high underwriting costs hence banks and other financiers are not eager to engage in small business lending for high risk industries.

Is the loan worthwhile?

Whether it's due to poor credit history or as a result of operating in a risky industry, getting financing if your business is classified as a high risk can be an uphill task. Even after obtaining a loan, the stringent measures attached to it can render it useless. For instance, the lender is likely to charge high interest rate to compensate for the risk associated with the financing. It's, therefore, crucial for small business owners to critically analyze their position to determine whether the loan is worth while.

Seeking non-traditional sources of funds

Recent statistics indicates that traditional financing institutions, particularly banks, rarely engage in small business lending for high risk industries. Figures from Capital Access Index prepared by Pepperdine university indicate that only 27 percent of the 59 percent small businesses seeking financing from banks actually get it. In fact, some commentators believe that it's only 10 percent whose application succeed. You will, therefore, be better off seeking financing from non-traditional or alternative sources.

Alternative sources a relatively expensive but can easily and quickly provide you with the funding that you require. In addition, there are niche alternatives that target specific industries. Try to establish whether there is niche alternative targeting your industry. For instance, if you're operating in the whole food industry, consider acquiring a loan from your local Whole Food (WFM) producer program. It is estimated that the program so far has provided loan facilities amounting to over $10 million since 2007.

The internet is also awash with numerous lenders purporting to be engaging in small business lending for high risk industries. Borrowers however should be cautious when considering these offers. Not all offers are appropriate for your business. Make sure the loan you acquire meets your requirements. Most importantly, familiarize yourself with the terms and conditions, and costs attached to the loan facility.


In a nutshell, alternative sources of funding are your best shot when seeking financing facilities for your high risk business. While there are numerous alternative providers of small business lending for high risk industries, consider one that offers flexible payment plans and easy loan application process.