Risk in Business: What Businesses Are Classified as High Risk?

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If your business is high risk it can impact everything from merchant services to insurance. We take a look at the meaning of high risk in business terms.

When you are trying to get the most out of your company, it’s important to mitigate as many risks and liabilities as possible. There are a number of factors that you will need to be aware of when you are looking to take your business by the horns and make it a success.

You’ll definitely need to know what to do if you happen to operate a high-risk business.

While risk in business is part of the process, banks and lenders are particularly careful about working with companies that are specifically labeled high-risk.

Risk in Business

Consider these tips to learn what makes a company high-risk, and which industries are among the most common.

What Makes a Company High Risk?

Banks are wary of doing business with companies that are high risk. Some factors of high risk in business include a lot of payments made by credit cards, industries that are subject to fluctuation, and those that operate in potential legal gray areas.

You need to be aware of these industries so you can act accordingly. The following business types are particularly high-risk:

Debt Collection Services

The problem with running a debt collection business is that it’s incredibly difficult getting customers to pay.

There’s a reason that so many companies cut deals with debtors that often include forgiving a good amount of debt. Sending delinquent accounts to collections is a step, but it still doesn’t guarantee that customers will ever pay.

If you operate one of these businesses, your books consist of potential, but not necessarily income. Because of this, banks and other financial institutions tend to shy away from these companies or are at least aware of the risk involved.

Travel Booking Companies

The travel industry is subject to ups and downs, and people don’t take as many expensive trips when the economy is bad.

Since there are so many moving pieces, it’s difficult to operate without a certain measure of risk. Further, vacationers are always subject to problems that could involve heavy refunds or booking directly with the property or airline.

A lot of vacationers book their trips using credit cards to get the best rates early, then pay their cards down later. Since heavy credit card use makes these businesses high-risk in the eyes of banks, you’ll need a quality card processing company.

You can link up with vendors like this company, which specializes in processing credit card transactions for high-risk businesses.

Bitcoin Trading

Bitcoin is a form of currency that is on the rise in popularity — but we still don’t really know how it will pan out.

There’s a huge rush toward cryptocurrency because it’s cited as the next big thing. However, until the markets start to play out, and until we gain a better understanding of how it will be used, it’s difficult for banks to not see this industry as high-risk.

It will take a little while for industries to jump completely on board with cryptocurrency. Expect this to remain a high-risk proposition until Bitcoin becomes the norm.

Risk In Business Shouldn’t Deter You

If you’re running a company, you always need to be aware of risk in business.

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