There are a few things you can do to boost your chances of securing approval for a high-risk business loan. You may, for example, offer collateral or secure a cosigner who has a good credit history. You may also consider partnering with someone who has good credit or valuable assets to offer as collateral. If you think you are unlikely to have success with a traditional lender, however, you may seek the funds you need from family members and friends instead. You may even find a willing lender through a peer-to-peer lending network, which is a network through which ordinary people lend money to their peers.
Sometimes, lenders are more willing to give high-risk business loans to borrowers who have collateral. Collateral is an asset the lender can seize and possibly resell if you fail to make timely payments on your loan. In some cases, offering collateral makes the difference between a loan rejection and an approval. A lending company may feel that it is taking on less of a risk if it can recoup some of its money in the event of a loan default.
You may also boost your chances of securing a high-risk business loan if you can convince a friend or family member to cosign for the loan on your behalf. This may work if your credit is mediocre or poor and your credit history is the main reason the lender is hesitant about granting the loan. It is important to note, however, that your cosigner’s credit is at risk if you fail to repay the loan as agreed. In the event of a default, the lender may begin collections efforts against you and the cosigner. The lender may even sue you and the cosigner for repayment of the debt.
If you are a sole proprietor and you are having trouble securing a high-risk business loan, you may improve your chances of success by taking on a partner. For example, if you have poor credit or no income or assets with which to repay a loan, a lender is unlikely to view you favorably. If you can attract a partner for your business, however, he may use his good credit history or assets to secure the loan for your company. It's important to keep in mind that you will have to split the profits you earn from the business with your new partner.
Depending on your unique situation, you may find that a traditional lender is not your best option for securing the high-risk business loan you seek. Instead, you may consider asking friends and family members to help fund your business venture. Additionally, you may consider applying for a loan through a peer-to-peer lending network. Typically, peer-to-peer lenders are less strict about lending criteria than traditional lenders.
