Tips for high-risk investment borrowing
Finance solutions for high-risk industry borrowing are not new. Indeed, over a decade ago, it was something a small number of household names or large multinationals would lend for. The industry catered for a small number of niche activities such as defence, gambling and the tobacco industry. Nowadays, financing needs are far more significant and widespread across many industries.
High-risk investment borrowing is now more common and high-risk companies are far more common. Players are often smaller and can bring what is now considered far more mainstream entrepreneurial products or services that lenders may still view as risky. High-value international finance brokers such as Enness Global help individuals and business owners access competitive finance and lending solutions that offer widespread lending solutions for the new landscape of high-risk borrowing.
New lenders, new opportunities
Smaller or less well-known lenders have joined the fray, looking to offer finance solutions to ultra-high-net-worth individuals (UNHWI) and those with the ideas and entrepreneurial skills operating within the modern landscape of high-risk industries. Some industries the world has been familiar with for years are adding novel or higher-risk activities that see them move into revolutionary tech, apps, gaming and gambling, certain types of AI activity or areas such as drugs for medicinal purposes. Industries that can range from mainstream to relatively new blockchain and cryptocurrency and those that fall into the middle ground gap between the old niche activities and the new growing range.
High-risk entrepreneur finance
It can be challenging for those in high-risk industries to raise finance of any kind. Despite often having successful business ventures and even great personal wealth, they can find themselves in the problematic financing climate of the UNHWI. No matter their success or wealth, they find getting any form of borrowing or mortgage challenging. Despite usually being a well-advised top-quality borrower, they optimise tax through highly legitimate jurisdictions and structures supported by well-documented wealth sources.
The challenges to finding borrowing solutions for an entrepreneur can extend to restrictions or refusal even when they are not directly involved in a high-risk industry, meaning they will often be unable to get a mortgage. Lending decisions are often made simply because an individual has a distant or tenuous link with a high-risk industry. One that their only involvement could have been in building a proprietary infrastructure, system or tech services for a high-risk client. The tobacco industry, in particular, can be impossible for connected individuals even when they have never directly sold or marketed the products. Similar experiences are found when distant connections or trivial links with high-risk industries of any shape are identified.
Solutions other than cash
Very few entrepreneurs will have unlimited cash funds to make a high-value property or asset purchases and therefore need to sell or liquidate assets to generate the necessary capital. This may not be the most appropriate timing or way to raise funds for many reasons, including personal or investment performance and fiscal planning.
Without the help of experienced high-value specialist lending and finance brokers, the only solution for entrepreneurs with high-risk businesses or associations could be to make a cash purchase. Yet, in many cases, the detailed presentation of your finance application gives the specialist broker the ability to tap into a receptive network of lenders that can elicit a favourable response that was not possible before.
The approach matters
High-risk investment borrowing brokers with specialist expertise and experience will be able to broker with the knowledge of the details that each lending institution requires to make a lending offer. A specialist will build the relationship with the lender and present your information in a way that helps the lender understand the risks and evaluate the merits of the borrower separately from those of their businesses. Many banks will treat entrepreneurs and their businesses as a single unit. This helps them see the lending risk from the perspective of the borrower, not the high-risk industry they made their wealth from. A high-risk industry does not always make the borrower themselves high-risk, and knowing how to present each unique case is key to successful lending decisions. The key is in the detail.
Some lenders will refuse some high-risk industries without finding out about the person. It is this specialist knowledge that a broker such as Enness with excellent solutions such as bridging loans can use to make a difference. They can target lenders more comfortable with specific industries, avoid those that will never help and know which facts to present to make a difference.
Making a plan
A detailed plan will support applications to specific lenders using lending experience. A broker will give lenders information and hard facts to help the lender understand the borrower’s case. This application knowledge can be a game changer and particularly helpful where the high-risk industry link is tenuous.
A broker experienced this will help lenders in fully understanding the risks of lending and provide documentation and facts that give them a greater understanding of the actual risks rather than the perceived ones. An individual and specialist approach can secure lending for many borrowers they would not consider otherwise and whose applications would never be accepted directly.
Specialist lending market experience over many years can change the nos to yeses for high-risk investment borrowing seekers.
Don’t let difficulties stop you searching for the best deal
The difficulties in borrowing do not always contain themselves in business situations. Often, the perceived risk of entrepreneurs, whether in high-risk industries or not, can spill into their personal life. Whether you have made your money from tobacco, cryptocurrency, gambling or artificial intelligence, your entrepreneurial skills and ability to create wealth through high-risk industries need not be a factor in your ability to borrow money.
This can affect lending decisions for personal assets, including a primary residence and make securing any form of mortgage impossible without assistance. It also can bear no relation to how well any wealth supports a loan or a refusal due to overambitious borrowing. It can simply be that the lenders do not spend the time to get to know the whole story and do not understand the borrowers’ full circumstances. Without the lending broker relationship, they will often refuse before taking the time to learn. A broker-supported application will be more likely to succeed as the lenders understand the bigger picture, making them better understand their risk and reach a conclusion on terms that protect themselves and the borrower.