The economic climate has changed in the past 10 years. Now even the most cunning of entrepreneurs are having a difficult time financing their startups. Currently, banks and investors are searching for low risk and uncontroversial businesses to fund that will almost guarantee a return on investment.
If you have all the pieces in place to launch a successful venture, but are still turned away by traditional lenders, it may be because your particular business is seen as “high risk.” Some examples of high risk businesses are: marijuana or e-cigarette ventures, adult ventures, credit companies, and debt collection agencies. If your business does not fall into any of these categories, there are other markers that can drastically lower a business’ ability to obtain financing.
- Historically high failure category.
- Poor public image company.
- A business led by an inexperienced team
- Companies in a sector that only sees small returns.
- Large upfront investments to start.
- Dependence on government regulations, connections, or politics
- Startups not located in the USA.
If your business is classified as high risk, there are still many funding options available, if you know where to look.
- Relatives and friends. Friends. How many of us have them? Even if your business is high risk, generally your relatives and friends are good sources for capital, as they believe in your personal ability to succeed. They are often more generous and some may not require anything in return (though you should repay them once your business is off the ground).
- Microlenders and web-based lenders. Be sure to do your research before dealing with these types of loan organizations. There are several nonbank financers that offer small loans up to around $25,000 to high risk startups. If your credit isn’t stellar, this might be a good choice for your business as some microlenders report your repayments to credit bureaus which can restore your credit.
- Grants and gifts. This avenue is often forgotten. To avoid repayment, search for grants via programs dedicated to funding your particular type of business. Retail companies, tech companies, and healthcare companies that operate in low income areas often qualify for grant money.
- Credit. Many startups are ignited this way because credit is an easy and fast way to get to capital. Often the amount of credit available is limited and will be based on your demonstrated ability to repay the loan. Also beware of higher interest rates and harder penalties if you miss a payment.
- Customer lenders. If you already have some dedicated clientele, this option may be right for you. Owners can accept capital from customers, who are then repaid via discounted services/products, or in gifts at a later date. The downside to this strategy is that customers may decide they don’t want the agreed upon compensation and demand cash instead.
If you have a high risk business, don’t give up there are still a multitude of lending options available to fund your dreams. Go get them.
About the Author
Hello, I’m Blair Thomas and I’m an electronic payment and marketing expert. I’m also the proud co-founder of eMerchantBroker.com, the best e-cig merchant account broker in the U.S. I enjoy hiking, dining and discovering new music. When I’m not working, you can most likely find me producing and writing music. Add me to your circles at Google +