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.