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Finding a loan for high-risk businesses is challenging but not impossible. Keep reading to learn more what high-risk loan options are available for your business.
Erica has been writing about small business finance and technology since 2008. She joined Merchant Maverick in 2018 and specializes in researching and reviewing business software, financial products, and other topics to help small businesses manage and grow their operations. Her expertise has been cited in MSN, Reader's Digest, Vox, U.S. News & World Report, and Real Simple. She is a Certified ProAdvisor for QuickBooks Online and QuickBooks Payroll, a graduate of Limestone University, and currently resides in Greenville, South Carolina.
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Erica SeppalaErica has been writing about small business finance and technology since 2008. She joined Merchant Maverick in 2018 and specializes in researching and reviewing business software, financial products, and other topics to help small businesses manage and grow their operations. Her expertise has been cited in MSN, Reader's Digest, Vox, U.S. News & World Report, and Real Simple. She is a Certified ProAdvisor for QuickBooks Online and QuickBooks Payroll, a graduate of Limestone University, and currently resides in Greenville, South Carolina.
Editor & Senior Staff Writer
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Chelsea Krause is a writer who specializes in accounting, payroll, and small business loans. She has been helping small business owners manage their finances since 2016. She is a QuickBooks Certified User and former eCommerce store owner. Her accounting expertise has been quoted in Forbes and her work appears in Startup Nation, Small Business Bonfire, and Women on Business. Chelsea graduated summa cum laude with a BA in English & Creative Writing from George Fox University and studied abroad at the University of Oxford as well.
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Chelsea KrauseChelsea Krause is a writer who specializes in accounting, payroll, and small business loans. She has been helping small business owners manage their finances since 2016. She is a QuickBooks Certified User and former eCommerce store owner. Her accounting expertise has been quoted in Forbes and her work appears in Startup Nation, Small Business Bonfire, and Women on Business. Chelsea graduated summa cum laude with a BA in English & Creative Writing from George Fox University and studied abroad at the University of Oxford as well.
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Startups, bad-credit borrowers, and businesses in certain industries may find it difficult to qualify for a small business loan. For these businesses, high-risk business loans may be the solution to funding challenges.
Keep reading to learn more about high-risk loans, what businesses they’re best for, and our top five lender picks.
High-risk business loans may have higher interest rates and shorter repayment terms. But high-risk loans also have minimal borrowing requirements and are easier to obtain than loans from traditional lenders like banks.
Start your search for a high-risk business loan with these top five lenders.
Why We Chose BusinessLoans.com For Best High-Risk Marketplace
BusinessLoans.com is a loan marketplace that eliminates the hassles of shopping for the best loan offers. Through BusinessLoans.com, businesses can receive multiple offers from lending partners with just one fast and easy application.
BusinessLoans.com has a number of loan options through its partner network. Startup funding, no minimum credit score requirements, an easy application process, and excellent customer service make BusinessLoans.com a good choice for businesses that may not qualify for funding elsewhere.
BusinessLoans.com Services
BusinessLoans.com offers many types of funding through its partner network, including:
Because it works with multiple lenders, eligibility requirements vary.
There are no minimum credit score requirements. Generally, qualified businesses will have been in business for at least 6 months and have revenue of $100,000/year. However, BusinessLoans.com may have options if you don’t meet these requirements.
Choose BusinessLoans.com If ...
You have a low credit score or haven’t been in business long and don’t qualify for funding elsewhere
You want to easily compare loan options with one application
Why We Chose Kiva U.S. For Best Crowdfunded Microloans
Kiva U.S. is a crowdfunding platform that has minimal borrowing requirements. There are no revenue, time in business, or minimum credit score requirements. Most businesses will qualify for funding, although businesses that are involved in multi-level marketing, illegal activities, or financial investing are ineligible.
The application process is lengthy, and you will have to recruit friends and family to loan to you for Kiva's "social underwriting" step. Once this is completed, your loan will be placed within Kiva's crowdfunding platform, where you can score a microloan with an unheard-of 0% interest rate.
Kiva U.S. Services
Kiva provides crowdfunded small business loans up to $15,000.
Kiva U.S. Rates & Fees
Kiva stands out for its 0% interest rates. No additional fees are charged to receive a crowdfunded loan.
Kiva U.S. Eligibility Requirements
Kiva U.S. has minimal borrowing requirements. Borrowers must:
Own a U.S.-based business
Be at least 18 years old
Use loan proceeds for business purposes
Demonstrate social capital by borrowing funds from friends & family
Not be in current bankruptcy or foreclosure
Not currently be under a lien
Choose Kiva U.S. If ...
You want a no-interest microloan
You’re ready to go through the steps of crowdfunding to get a loan
Why We Chose Rapid Finance For Best High-Risk MCAs
Rapid Finance offers multiple options for small business funding, either by originating the loans in-house or by pairing you with one of its lending partners. Rapid Finance can help businesses receive all types of funding, from long-term SBA loans for borrowers with good credit to MCAs and other options for high-risk businesses.
For many of its loan options, Rapid Finance has minimal borrowing requirements. The application process for many of its loans is quick and easy. Interest rates and fees aren't disclosed online, but it's safe to assume that high-risk borrowers will have higher rates and less-favorable terms than their less-risky counterparts.
Rapid Finance Services
Rapid Finance connects you to a variety of financial products, including:
Why We Chose Fundbox For Best LOC For High-Risk Businesses
High-risk businesses that need a flexible form of funding should consider Fundbox's lines of credit. Unlike a conventional loan, this line of credit allows you to make multiple draws as needed, with funds hitting your account as quickly as the next business day.
This is a great option for businesses that need working capital or have an emergency expense. With minimal borrowing requirements, even businesses that were turned down elsewhere may qualify for funding through Fundbox.
Fundbox Services
Fundbox provides business lines of credit up to $150,000.
Fundbox Rates & Fees
Fundbox’s lines of credit are repaid over 12 or 24 weeks. Fees start at 4.66%+ (12-week terms) or 8.99%+ (24-week terms).
Fundbox Eligibility Requirements
To be eligible for a line of credit, you must meet these lender requirements:
U.S.-based business
Minimum credit score of 600
Revenue of $30,000/year
At least 3 months in business
Must have a business checking account
Choose Fundbox If ...
You want a flexible line of credit that you can draw from as needed
You want a fast loan approval and funding as quickly as the next day
Why We Chose Accion Opportunity Fund For Best Loans For Underserved Businesses
Accion Opportunity Fund specializes in funding underserved businesses, including those owned by minorities, women, immigrants, and people with low-to-moderate income. Borrower requirements are minimal, and there are no minimum credit score requirements.
In addition to its loans, Accion provides educational resources, coaching, and support to small businesses that are traditionally overlooked by other lenders.
Accion Opportunity Fund Services
Accion Opportunity Fund offers small business loans up to $250,000.
Accion Opportunity Fund Rates & Fees
APRs for Accion loans start at 8.49%. An origination fee of 3% – 5%will be charged, and additional fees may apply.
Repayment terms up to 60 months are available.
Accion Opportunity Fund Eligibility Requirements
To qualify for a loan, you must meet these requirements:
Be at least 18 years old
Own at least 20% of the business
At least $50,000/year in revenue
12 months in business
Choose Accion If ...
You want low-cost, long-term funding
You’re an underserved business owner that can’t acquire funding elsewhere
Business Loan & Funding Products Review Methodology
We spend hours researching and evaluating each business loan and funding product that we review at Merchant Maverick, placing special emphasis on key characteristics to generate our ratings.
Weighted Rating Breakdown
Rates & Fees 20%
Services 20%
Eligibility Requirements 20%
Application 15%
Sales & Advertising Transparency 10%
Customer Service 10%
User Reviews 5%
When rating lenders and funding providers, we use a 31-point rubric that looks at rates and fees, services, eligibility requirements, application, sales and advertising transparency, customer service, and user reviews. We weigh each section differently to calculate the total star rating. This rubric is applied to traditional term loans, as well as short-term loans, start-up loans, lines of credit, online lending products, merchant cash advances, and equipment financing products.
Rates & Fees: 20% of the total star rating
Services: 20% of the total star rating
Eligibility Requirements: 20% of the total star rating
Application: 15% of the total star rating
Sales & Advertising Transparency: 10% of the total star rating
Customer Support: 5% of the total star rating
User Reviews: 5% of the total star rating
Each section is further broken down into granular, weighted subsections, in which we examine specific attributes like terms lengths, conditions of repayment, credit score and revenue requirements, ease of application, length of time to funding, the ethics involved in promoting the lending product, customer support, and the overall reputation of the lender or funding provider.
There isn’t just one factor that makes a business risky in the eyes of a lender. If your business is defined by any one of the following five characteristics, it may fall into the high-risk category.
Startups & new businesses: These are considered risky to lenders because they haven’t yet proven that they are profitable and don’t have the paperwork to verify their success.
Businesses with low revenues: Lenders want to see that a business is making enough money to cover all of its debts in addition to a new loan payment.
Business owners with bad personal credit: For most lenders, personal credit is one of the most important factors taken into account when deciding whether to approve a loan. The higher the credit score, the higher the odds for approval — and more favorable rates and terms.
Business owners with no personal credit history: A lack of credit history may also be viewed similarly to bad credit by lenders.
Businesses in a high-risk, unstable industry: Whether the industry itself is dangerous or the business itself is at risk of becoming obsolete, lenders consider industry factors when approving loans.
Best Loan Options For High-Risk Businesses
There are several funding options available for high-risk businesses. Here are some of the top options if your business doesn’t qualify for conventional business loans.
Short-Term Loans
Short-term loans are loans that are paid off in a short period of time – usually one year or less. Interest rates are often higher than other loans (such as long-term installment loans).
The trade-off is that short-term loans have less stringent requirements, including lower credit score, revenue, and time in business requirements. The application process is generally quick and easy and funds are available quickly — typically hitting your account in just a few days or less.
Merchant Cash Advances
Instead of taking monthly payments and using collateral to back up the loan, a merchant cash advance is paid back through a percentage of future credit card sales. With some MCAs, a fixed payment is made through weekly or daily ACH withdrawals.
Because this method of financing is based on sales, credit score and time in business are typically not as important as they are with other loans. While this opens up funding opportunities for new businesses and bad-credit borrowers, interest rates can be high, with some annual interest rates soaring into the triple digits.
Invoice Financing
Invoice financing is an easy way for businesses to resolve cash flow issues due to unpaid invoices. This option can be used by businesses with a low credit score, lack of collateral, or a limited time in operations.
There are two invoice financing options to consider. With invoice factoring, the lender pays the business a percentage of the invoice total. After collecting payment from the customer, the remaining invoice total is given to the business, less any fees and interest charged by the lender.
The second option is invoice discounting. The lender gives the business a loan based on a percentage of the invoice. Once the business collects payment from the customer, the loan is paid back, along with interest and fees.
Personal Loans For Business
Instead of getting a business loan, some business owners may opt to use their own personal credit score and income to qualify for a personal loan for business.
Since it is a personal loan, the revenue of the business or its credit score will not be a factor in approving the loan. This is ideal for new businesses or borrowers that haven’t established a business credit score.
Asset-Backed Business Loans
Asset-backed business loans are business loans that are backed by collateral. The borrower pledges to put up assets in the event that the loan goes into default. If the borrower fails to pay, the lender has the right to seize the assets, which can then be sold to pay off the loan.
Assets and property, including real estate, equipment, and accounts receivables, can be used as collateral. Typically, business assets are used as collateral, but in some cases, personal real estate and assets may be used.
Business Credit Cards
Business credit cards allow a business owner to have access to funds on demand. The application process is typically quite easy, and even borrowers with lower credit scores can get approved. Some credit cards even come with rewards, such as cash-back bonuses or airline miles.
The Bottom Line On High-Risk Loans
Every business faces financial challenges, which are made even more difficult when the business is seen as high-risk by lenders. However, there are financing options open to these high-risk businesses, whether they’re in an unstable industry or are just building up their credit and reputation.
Before accepting any offer, don’t forget to evaluate the full cost of the loan. A loan should only be used to help the business, not drag it into debt. Shopping around for offers and weighing out the pros and cons of each type of financing is a critical step before signing on the dotted line.
Responsible borrowing — and making payments as scheduled each month — is the best way for businesses to receive more favorable loan options in the future.
Erica has been writing about small business finance and technology since 2008. She joined Merchant Maverick in 2018 and specializes in researching and reviewing business software, financial products, and other topics to help small businesses manage and grow their operations. Her expertise has been cited in MSN, Reader's Digest, Vox, U.S. News & World Report, and Real Simple. She is a Certified ProAdvisor for QuickBooks Online and QuickBooks Payroll, a graduate of Limestone University, and currently resides in Greenville, South Carolina.
View Erica Seppala's professional experience on LinkedIn.
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The vendors that appear on this list were chosen by subject matter experts on the basis of product quality, wide usage and availability, and positive reputation.
Merchant Maverick’s ratings are editorial in nature, and are not aggregated from user reviews. Each staff reviewer at Merchant Maverick is a subject matter expert with experience researching, testing, and evaluating small business software and services. The rating of this company or service is based on the author’s expert opinion and analysis of the product, and assessed and seconded by another subject matter expert on staff before publication. Merchant Maverick’s ratings are not influenced by affiliate partnerships.
Our unbiased reviews and content are supported in part by affiliate partnerships, and we adhere to strict guidelines to preserve editorial integrity. The editorial content on this page is not provided by any of the companies mentioned and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author’s alone.
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