Why Is My Company Called “High Risk” By Cash Advance Groups?

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Merchant cash advances are famous for being far more accepting than banks – and that’s why so many businesses have learned to love and rely on them. However, once in a while, you may end up being rejected for an advance loan. In most cases, this is because you already have an advance out, because your cash flow is skewed, or because your company is still too new to really be considered to be a viable candidate for B2B funding of any sort.

However, once in a while, you’ll hear about a company that struggles with getting cash advances despite having a good track record. These companies are often called “high risk” companies by advance groups, and chances are you may have heard your company be called “high risk” by a lender.

When cash advance groups call you “high risk,” it’s typically because you belong to an industry that is risky to work with. Wondering why that is? Here are the most common reasons why cash advances may have been denied to you based on being in a high-risk industry.

  1. Your industry is hard to keep track of on paper, and it’s not really obvious how people will be paying for services via credit card. If you belong to an industry that traditionally doesn’t have anything to do with credit cards, chances are that it will looks sketchy and will cause you to be branded “high risk.” Authors, artists, and certain kinds of consultants tend to be called high-risk by merchant cash advance groups because of this.
  2. You belong in the bar industry. Restaurants tend to fare very well with cash advances, but if you’re a bar that doesn’t serve food, it can get dicey. This is where it crosses into nightlife, and nightlife isn’t exactly good with credit cards. Some groups will turn you away because they feel the nightlife industry is too unpredictable.
  3. Your industry is notorious for chargebacks and refunds. A lot of industries get deemed surprisingly high-risk because of this, and it’s understandable. It’s hard to fully gauge what profits will be like if you’re dealing with a lot of potential refunds, after all. Airlines and hotels, for example, may have this issue with some merchant cash advance groups.
  4. The industry you belong in is considered to be legal grey area, or borderline illegal. The vast majority of merchant services groups will not offer advances to ammunition stores, cannabis companies, or adult entertainment groups. It’s just too much red tape for them to handle, and too high a risk.

If you have been called “high risk” by a company, don’t give up. Each merchant cash advance group has its own standard as to what high-risk happens to be classified as. What may be risky for one group might not be risky for another. At Maple Advances, we review every applicant on a case-by-case basis, so if you want an advance without worrying about being needlessly labeled “high-risk,” give us a call.