Securing loans for high risk businesses made manageable

Businesses with huge returns are invariably also the ones that are riskier and more difficult to manage. Right from funding for such high risk businesses to promoting them, all activities are rife with uncertainty and pose massive challenges to executives and managers of these businesses. Opening a night club in a city, for instance, could be a tough nut to crack in terms of securing capital for the same. Not only will the lending institutions be worried about the sustainability of such businesses, but will also not want to give you an affordable loan because of concerns such as crime rates in the city impeding smooth business for your night club. Then, there are more high risk businesses that are also capital intensive, and leave founding members in trouble as regards the financing requirements. Here, we tell you more about the intricacies of securing loans for night clubs and pubs and other high risk businesses.

Get a co-signed loan

The major reason that a bank or any other lending institution will find for not granting your business a loan will invariably be the riskiness of the loan and the uncertainty about your capacity of repaying it. However, you can enjoy the rub-off effect from another person with credible paying history and credit score by having him co-sign the loan for you. When you choose this approach, you effectively reduce your problem from convincing a stingy bank to convincing a friend, with the latter being more manageable. A co-signed loan gives the much needed confidence to the lending institute about your risky business being able to manage timely repayment of the loan, because of the credit worthiness of the person acting as the co-signer. Technically, the co-signor would be expected to ensure that you make timely loan repayments.

Peer to Peer funding

Surprised, don’t be? This mode of loan securing is becoming increasingly popular with adventurous entrepreneurs who fail to find lending institutions who can match their appetite for risk. There are certain Internet website out there that can connect you to a pool of independent investors and venture capitalists who can provide you the needed capital with terms of repayment and interest rates that are much more manageable than what a bank would insist upon for a similar loan request. Not only can you get lower rates of interest, but can also get flexible payment terms such as no pre-payment penalties and no penalties for skipping monthly or quarterly minimum repayments for a certain number of days. Also, considering that certain investors will be able to appreciate the business potential of an ostensibly risky business, such a course of action is really a decent pick for entrepreneurs.

Look for banks that offer customized lending products rather than using stonewalled approval criteria

Most banks have set rules and approval parameters that they consider before approving or rejecting a loan application, or even categorizing a business as high risk one. However, with some research, you will be able to find banks offering short term but high interest loans that will be approved based on the number and frequency of sales being recorded by you in recent times, or the kind of revenues being posted by similar business in the industry. Whereas you will end up paying appreciably high rate of interest on such a loan, it will help you manage cash flow for your business or will let you begin with the selling or revenue generation activities soon. So, considering the magnitude of the capital requirement you are facing, such a course of action could be well worth taking.