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What Are High-Risk Business Loans & Where Do I Get One?

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 Seppala

  • Last updated onUpdated

    • Chelsea Krause

  • REVIEWED BY

    Chelsea Krause

    Lead Staff Writer

Our content reflects the editorial opinions of our experts. While our site makes money through referral partnerships, we only partner with companies that meet our standards for quality, as outlined in our independent rating and scoring system.

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.

Learn More About Our Top Picks

CompanyBest ForNext StepsBest For
BusinessLoans.com

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  • Maximum Borrowing Amount: $3M
  • FICO: No minimum
  • APR: Varies by lender
  • Maximum Borrowing Amount: $3M
  • FICO: No minimum
  • APR: Varies by lender

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Kiva U.S.

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  • Maximum Borrowing Amount: $15K
  • FICO: No minimum
  • APR: 0%
  • Maximum Borrowing Amount: $15K
  • FICO: No minimum
  • APR: 0%

Visit Site

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Rapid Finance

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  • Maximum Borrowing Amount: $1M
  • FICO: 550
  • APR: Varies by product
  • Maximum Borrowing Amount: $1M
  • FICO: 550
  • APR: Varies by product

Apply Now

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Fundbox

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  • Maximum Borrowing Amount: $150K
  • FICO: 600
  • Borrowing Fee: 4.66%+
  • Maximum Borrowing Amount: $150K
  • FICO: 600
  • Borrowing Fee: 4.66%+

Apply Now

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Accion

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  • Maximum Borrowing Amount: $250K
  • FICO: No minimum
  • APR: 8.49%+
  • Maximum Borrowing Amount: $250K
  • FICO: No minimum
  • APR: 8.49%+

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Read more below to learn why we chose these options.

What Businesses Are Considered High Risk?

There isn’t just one factor that makes a business risky in the eyes of a lender. There are several factors lenders consider before making their approval decision. If your business is defined by any one of the following four characteristics, it may fall into the high-risk category.

Startups & New Businesses

Startups and new businesses are considered riskier borrowers because they don’t yet have a proven track record. These businesses haven’t yet proven that they are profitable and don’t have the paperwork to verify their success.

Startups and new businesses will have to prove themselves to lenders in other ways, like coming up with a detailed business plan and future profit projections.

Businesses With Low Revenue

Lenders want to see that a business is making enough money to cover all of its debts in addition to a new loan payment. Because of this, businesses with low revenues will encounter problems when applying for a loan.

The reason for your low revenue doesn’t typically matter to a traditional lender. Regardless of why current revenue is poor, lenders will call into question whether your future revenue will be enough to pay back a loan as agreed.

Businesses 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.

Old medical bills, late payments, high credit card utilization, and multiple credit inquiries contribute to lower credit scores. 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.

If the future of the business could be in question, this throws up a red flag for lenders.

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.

5 Best High-Risk Business Loans

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.

  • BusinessLoans.com: Best Loan Marketplace For High-Risk Businesses
  • Kiva U.S.: Best Crowdfunded Microloans For High-Risk Businesses
  • Rapid Finance: Best MCAs For High-Risk Businesses
  • Fundbox: Best Line Of Credit For High-Risk Businesses
  • Accion: Best Long-Term Loan For Underserved Businesses

The Best High-Risk Business Loans Compared

Funding TypeMax. Borrowing AmountAPRRepayment TermsFICO
BusinessLoans.comSTLs, term loans, LOCs, MCAs$3MVariesVariesN/A
Kiva U.S.Crowdfunded loans$15K0%3-36 monthsN/A
Rapid FinanceMCAs, term loans, SBA loans, LOCs,$500K (MCAs)Not disclosedNot disclosedNot disclosed
FundboxLine of credit$150KFees start at 4.66%12 or 24 months600
AccionTerm loans$250KStarts at 8.49%Up to 60 monthsN/A

BusinessLoans.com: Best Loan Marketplace For High-Risk Businesses

BusinessLoans.com

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Read our Review

Total Rating 4.0
Rates & Fees4.6

Services4.0

Eligibility Requirements4.1

Application3.0

Sales & Advertising Transparency3.6

Customer Service4.1

User Reviews4.4



Pros

  • No minimum credit score
  • Quick & easy application process
  • Multiple types of loans available

Cons

  • Nontransparent rates & fees

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:

BusinessLoans.com Rates & Fees

Rates and fees vary by lender and loan product.

BusinessLoans.com Eligibility Requirements

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 six months and have annual revenue of $100,000. 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

Get Started With BusinessLoans.com

Read our in-depth review

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Kiva U.S.: Best Crowdfunded Microloans For High-Risk Businesses

Kiva U.S.

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Read our Review

Total Rating 4.2
Rates & Fees5.0

Services2.9

Eligibility Requirements4.9

Application3.5

Sales & Advertising Transparency5.0

Customer Service4.1

User Reviews4.4



Pros

  • No interest loans
  • No minimum credit score
  • No revenue requirements
  • No time in business requirements

Cons

  • Low borrowing limits
  • Funds can take a while to disburse

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

Get Started With Kiva U.S.

Read our in-depth review

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Rapid Finance: Best MCAs For High-Risk Businesses

Rapid Finance

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Read our Review

Total Rating 4.2
Rates & Fees3.6

Services4.3

Eligibility Requirements4.9

Application4.8

Sales & Advertising Transparency4.2

Customer Service2.9

User Reviews4.9



Pros

  • Minimal borrowing requirements
  • Multiple types of lows available
  • High borrowing amounts

Cons

  • Rates can be expensive
  • Repayments may be required frequently

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:

  • Small business loans
  • Lines of credit
  • Bridge loans
  • SBA loans
  • Invoice factoring
  • Asset-based loans
  • Commercial real estate loans
  • Merchant cash advances

Rapid Finance Rates & Fees

Rates and fees vary by product and are not disclosed by Rapid Finance.

Rapid Finance does disclose that you can borrower up to $500,000 with an MCA. Other funding options with limits up to $5.5 million are available.

Rapid Finance Eligibility Requirements

Eligibility requirements vary by product. For many of its products aimed at high-risk businesses, Rapid Finance requires:

  • A valid ID
  • Bank statements from the last three months
  • Routing and account numbers for your business bank account

Choose Rapid Finance If ...

  • You want to compare your loan options
  • You want fast funding in as little as 24 hours

Get Started With Rapid Finance

Read our in-depth review

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Fundbox: Best Line Of Credit For High-Risk Businesses

Fundbox

Apply Now

Read our Review

Total Rating 3.8
Rates & Fees3.1

Services3.6

Eligibility Requirements4.5

Application4.8

Sales & Advertising Transparency3.8

Customer Service3.0

User Reviews4.4



Pros

  • Low credit score requirements
  • Fast & easy application process
  • 6+ months in business

Cons

  • Rates can be expensive
  • Short repayment terms

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 terms. Fees start at 4.66% of the borrowing amount for 12-week terms, and 8.99% of the borrowing amount for 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 $100,000/year
  • At least six 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

Get Started With Fundbox

Read our in-depth review

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Accion: Best Long-Term Loan For Underserved Businesses

Accion

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Read our Review

Total Rating 3.8
Rates & Fees5.0

Services2.1

Eligibility Requirements4.1

Application3.5

Sales & Advertising Transparency4.8

Customer Service3.9

User Reviews3.2



Pros

  • Specializes in funding underserved businesses
  • Minimal borrowing requirements
  • Fast & easy application process

Cons

  • Rates can be expensive
  • Some additional fees

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 loan, 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% to 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

Get Started With Accion

Read our in-depth review

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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.

Read more about how we rate small business lenders.

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.

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Erica Seppala

Erica Seppala

Editor & Senior Staff Writer at Merchant Maverick
Erica began writing on small business topics in 2008. She joined Merchant Maverick in 2018 and focuses on loans, accounting, and POS. She is a Certified ProAdvisor for QuickBooks Online and QuickBooks Payroll. She has been cited in MSN, Reader's Digest, Vox, U.S. News & World Report, and Real Simple. She is a graduate of Limestone University and resides in Greenville, South Carolina.
Erica Seppala
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