Your business was just classified as “high risk.” What could have happened to cause this scenario? Understand what makes a business “high risk” with a look at key factors.
1. Lack of Collateral
A major concern in the financial world is having collateral for your borrowed funds. A lack of collateral simply makes you risky. If a loan cannot be paid back, the creditor loses out.
A solution to this scenario is a merchant account provider for high risk businesses. You want someone who understands your situation. These businesses thrive on supposed risky investments. Partner with them to improve your standing in the business world. In the future, you’ll have collateral after building up your stability with growing profits.
2. History of Chargebacks
Your company tries its best, but your customers continually try chargebacks on their purchases. Whether or not these chargebacks are warranted, they still make you a high-risk company.
No bank wants your sales to be reversed due to poor products or fraudulent situations. Most businesses should have little to no chargebacks on their records. Your industry or business practices, however, may attract these credit-card disputes. It’s the nature of the business! Try to manage them with exemplary customer service to see a turnaround.
3. Poor Credit History
You tried your hardest, but late payments and miscommunication have lowered your credit score. Poor credit history is grounds for a high-risk designation. Try to turn these situations around by paying your debts on time. You’ll need a long history of good credit before the banks will see you as average risk. Managing your finances with the help of merchant account services might be a good option.
4. Specific Industries
There’s a stigma attached to certain industries that may not apply anymore, but banks are still wary. If your business deals in adult products, telemarketing or seminar sales, these sectors have been historically negative when it comes to financial matters. Regardless of your particular reputation in the industry, the company is deemed as high risk.
If you work legitimately for these industries, you may always have a high-risk company. Simply turn to merchant account services that specialize in your area.
5. Accident Tendencies
Certain industries are plagued with accidents, such as mining conquests. They’re certainly legitimate businesses, but the risk remains high. You’ll be categorized as a high-risk company until you have a proven record.
Stick with strict compliance rules so that accidents aren’t normalized on your watch. Keep records of an accident-free workplace and advertise them to any creditors.
Be aware that some banks will still hold your industry’s track record up as proof of your high-risk situation. Turn to a merchant account provider for high risk businesses to be treated with fairness at every turn.
Prove your business’s worth with on-time payments, solid accounting, and regulatory compliance. Your company may be in a high-risk situation, but it doesn’t have to reflect that fact. Gain the respect of creditors so that you can secure loans with low-interest rates in the near future.