All startups are high risk, in a sense. But some startups fall under the formal definition of “high risk,” where finances are concerned. These are the startups that deal with travel booking, adult encounters, e-cigarettes and vaporizers, and other designated “risky” financial transactions.
Banks often do not want to do business with startups that deal in these arenas, labeling them “high risk merchant accounts.” That means that these startups have to find another way to process credit cards and accept the financial transactions that will keep their businesses going.
If you’re working on a new startup or considering launching a startup this year, you’ve probably already been thinking about what the New Year means for business. You’re thinking about increasing efficiency, expanding reach, innovating, and designing. You’re definitely thinking about earning money. But what if your high risk startup is getting in your own way?
The trouble is that many startups, especially those based around mobile technology, involve “high risk” business categories in at least one aspect. Think of all of the travel websites and apps out there, the ones that let you book flights and hotels at the tap of a button. Think about all the dating sites that require subscription payments, and all of the apps like Tinder. The line between a “low risk” idea and a “high risk” idea is often unclear, and it will be difficult to know on which side your business is going to fall until you’ve already gotten started.
If you have already started your startup, you may already be finding yourself running into banks who do not want to do business with your “high risk” company. If you haven’t started your startup, you may be surprised to learn that your big idea is considered to be “high risk.” Either way, you need to figure out a solution to help your business grow.
Luckily, there are many companies available to provide financial solutions your high risk merchant account. These companies both work with businesses in high-risk categories as well as businesses that have bad credit — after all, the only real way to get out of a credit problem is to bring in more customer revenue, which is often difficult if banks are unwilling to help you achieve that goal.
These companies provide a third party service through which you and your customers can process financial transactions, giving you the opportunity you need to earn revenue and build your business. They help high risk startups become less risky, by giving them a way through which to earn money, and by helping them establish a foothold in their respective markets.
So. Are you launching a startup this year? Are you hoping to change 2014 by making it the year of your company, or app, or website, or product? You may be high risk, and may not know it yet. But that shouldn’t be a barrier to entry, and shouldn’t be a reason for you to set your startup dreams aside. Create your business plan, hire your team, start working on your startup, and know that you have options if banks consider you too risky. Being “high risk” doesn’t mean you’re at a high risk of failing. It only means that you need to look for alternative strategies to help you achieve success.