High Risk Business Loans to Keep Your Business Afloat
Running a business, no matter how simple it seems like it should be, is an extremely complicated process. Most of the time you hear people talking about how hard it is to get a business off the ground, and how such a high percentage of businesses fail in their first couple of years of existence. What you don’t realize is that many business struggle just as badly when they experience a little bit of success. Cash flow management is not an easy thing to do, and even business with steady sales find themselves short of money at times, and that’s when high risk business loans may be the only thing that keeps them alive.
A high risk business loan is actually a pretty risky prospect on both sides of the table. On one side you have the business owner who is an extreme cash crunch. They’re not even sure about whether their business will survive, let alone whether they’ll be able to pay back the loan.
The other party is the lender, and they’re extending this credit to what could be a sinking ship with no hope of recovery. You might ask yourself why these lenders would take this chance at all. Well, like all lending situations, they make the loans because they know the statistics of their business. If they charge high enough interest rates, and require enough of a down payment, they’re business can stay profitable.
The amount being lent in with high risk small business loans depends completely on the size of the business, in terms of sales, and the amount of cash they can put down on the loan. The more they can prove in terms of monthly sales, the bigger the loan they can qualify for.
You’ll notice I haven’t mentioned anything about credit score with these kinds of business loans. The fact is lenders in these situations don’t usually look at the credit-worthiness of the business owner, they just look at the business characteristics and make their decisions based on whether they think the business can handle the loan.
Business owners who have to use this kind of financing to keep themselves afloat should take it as a serious wake up call. They need to manage growth carefully with an extreme bias toward liquidity. Business ownership and personal finance have this in common – running out of cash is the absolute worst thing that can happen to you.