A high-risk business can be an enormous challenge for entrepreneurs. Businesspersons running small enterprises deal with big issues like funds, employees, customers, etc. These issues are multiplied ten-fold when a high-risk business is involved.
Most traditional banks are not keen on working with businesses that are viewed as high risk. These banks are conservative and highly concerned with their reputation. They do not want to work with entities and individuals who are associated with taboo and controversy.
It is highly unlikely that a reputable and known financial institution would offer any sort of high risk merchant services. And it does not just end here; getting a loan from these banks is almost impossible for a high-risk business.
Applying for insurance coverage is also a daunting task because insurance companies are skeptical of offering their services to high-risk businesses.
While the returns for high-risk businesses can be tempting, the stakes are equally high. So what can you, the owner of a high-risk business, do to mitigate these risks and keep your business running?
Here are some tips that you can use to fight all these challenges:
- Limiting Liability: This strategy works not just for high-risk merchants but most businesses. Opting for a limited liability company or limited liability partnership would ensure that the business owner is personally liable for any losses in case the corporation goes bankrupt. As a high-risk business, it would be reasonable to adopt a limited liability structure since the risks involved are exponentially high. In case your business goes bust, you would only be liable for any debts or losses limited to your shareholding or partnership.
- High Risk Merchant Accounts & Financing: As mentioned above, traditional banks are most likely to reject any kind of applications from high-risk businesses. Approaching them for their services would be a waste of time. Good news is that there are organizations that specialize in providing merchant and credit services to such businesses. They know the intricate details of high-risk industries and are equipped to deal with the specific requirements of businesses associated with these industries. They also offer credit options like loans and merchant cash advances for high-risk businesses So as a high-risk business owner, it would be smarter if you approach these merchant service providers and not waste your time on traditional banks that will surely not approve your application.
- Insurance Coverage: Besides adopting the right business structure, a high-risk business owner can limit their liability by applying for insurance coverage. This would shield the business from losses or liabilities in case of bankruptcy or insolvency. Some insurance agencies might charge a higher premium for offering services to high-risk businesses, but it might be worth it. A little bit of research might land your business the insurance provider that is willing to offer the right rates and coverage.
- Legal Aid: It goes without saying that every business needs a good lawyer. However, a high-risk business might need an even better attorney due to the challenges it faces in the form of chargebacks, complex regulations, lawsuits and other compliance requirements. So it is imperative that a high risk business hires a reputable law firm that gives them the best advice to fight its legal battles and stay afloat.
Let CutPay Help You!
We at CutPay understand the needs and requirements of high-risk businesses. We hope these tips from us help you in running your business. However, if you want to apply for a merchant account for high risk business, you have come to the right place. Whether you’re an adult business, travel organization or any other company categorized as high-risk, we have a solution for you!
Just fill out the form below and give us some details about your business and one of our representatives will reach out to you shortly!