Lenders generally consider industries high-risk if they are more likely to fail. Risk is relative: for example, industries like alcohol and gambling might be considered high-risk because they’re subject to regulations that frequently change, while other industries like restaurant and retail might be seen as risky because revenue isn’t always guaranteed. Industries that are less profitable because of changes in technology, like the printing industry, are often considered high risk too, as well as industries that are new, progressive or operate close to legal grey areas like the cannabis industry.<\/p>
You might not be able to get a business loan from the bank if you’re in a high-risk industry \u2013 but you aren’t totally without options, as many online lenders are willing to work with high-risk industries. In fact, you might even be able to qualify for favourable rates if your business can back the loan with collateral, business assets or a personal guarantee. Otherwise, be prepared to pay.<\/p>
Invoice factoring technically isn’t a loan but an advance on your business’s unpaid invoices<\/a>. How does it work? You sell your business’s unpaid invoices at a discount to a factoring company, which pays a percentage of their value in advance. The factoring company then collects payments from your clients and gives your business the rest of the money, minus a fee.<\/p> Factoring is one of the easiest types of financing to qualify for, but it can be expensive. Your business might also be required to sign up for several months or years of factoring, which can make it difficult to qualify for other less-expensive types of financing in the future.<\/p> A merchant cash advance (MCA) is similar to factoring, but for customer-facing businesses like retailers or restaurants. It works by giving your business an advance on future sales,<\/a> which you repay plus a fixed fee with a percentage of your daily bank deposits or credit card transactions.<\/p> Like factoring, an MCA is easy to qualify for, but also one of the most expensive types of business financing out there. It can make it hard for your business to grow and is best left for emergency situations.<\/p> Don’t qualify for invoice factoring or a merchant cash advance? Some lenders offer short-term loans<\/a> that work a lot like a traditional term loan with smaller borrowing amounts, higher rates and shorter terms to pay back the loan.<\/p> Short-term loans typically come with daily or weekly repayments and, like merchant cash advances and invoice factoring, are expensive. But you usually don’t need collateral or good credit to qualify, and the turnaround time can be as fast as one day.<\/p> Vehicle and equipment loans tend to have a higher rate of approval since these loans are secured by the item you’re purchasing. This makes them a viable option for businesses that might not qualify for an unsecured loan and don’t have enough assets to use as collateral.<\/p> Still, some lenders might have some industry restrictions, so check before you apply. You’ll likely have to make a down payment of at least 10%, and you run the risk of losing the item you bought if your business can’t pay back the loan.<\/p> The CSBFP offers government-backed loans in amounts up to $1,150,000. You can apply for these loans through a chartered bank, credit union or a caisse populaire. They are at least 75% backed by the Government of Canada. Your business must make under $10 million in revenue annually to be eligible for this program. The decision for approval ultimately lies with your financial provider.<\/p> To be eligible for a CSBFP loan, you’ll need to earn less than $10 million annually in revenue, be a for-profit business and use the funds for a specific purpose, among other requirements. What you can use your loan for includes: the purchase or improvement of land or buildings, the purchase or improvement of new or used equipment and the purchase of new or existing leasehold improvements.<\/p>Best for businesses that rely on credit card sales: Merchant cash advances<\/h4>
Best for emergency expenses: Short-term loans<\/h4>
Best for purchasing a specific item: Vehicle and equipment loans<\/h4>
Best for financing large projects: Canada Small Business Financing Program (CSBFP) Loan<\/a><\/h4>
\n