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Traditional small business lenders are notorious for discriminating against certain industries when it comes to approving and rejecting small business loans. This is usually because these industries are wrongfully perceived as risky, illegitimate and financially unstable. However, anyone who works in one such industry knows that their business is extremely profitable and would have no trouble paying off a sizable business loan.

Here are four industries that have the hardest time being approved for small business loans from traditional providers:


More and more alcohol distributors, namely liquor stores, are now carrying both wine and beer due to a recent increase in customer demand for the two products. Buying all this inventory is obviously very expensive, and it takes time for liquor stores to determine which products generate the highest profit margins and therefore should be purchased in larger quantities. So before they know what products to focus on most, liquor stores tend stock up on an excessive amount of inventory.

Solid cash flow is a crucial requirement for small business loan approval. Providers measure cash flow by examining how much money the applicant has in the bank. Buying too much inventory sometimes means having to pay suppliers upfront before paying yourself. If the applicant’s bank account is examined at the wrong time, it can give off the impression that more money is going out of the business than going in. Liquor stores looking to sell every product they can will likely have too tight of a margin to be approved for a business loan.


The primary reason retail stores have a slim chance of being approved for business loans is absolutely ludicrous. Retail is a female-dominated industry, and businesses owned by women are 15 to 20% less likely to be approved for small business loans than businesses owned by men. This harrowing statistic is merely the result of another: According to a report by the National Women’s Business Council, the average business started by a woman begins with half as much capital as the average business started by a man.

This suggests that the former does not have the ability to grow as fast as the latter and has significantly less credit history. A lack of capital and credit history leads to business loans for women being perceived as “risky,” or less likely to be successfully repaid. It also prevents female business owners from offering the collateral necessary for approval and having as much money in the bank as providers would like to see. A new retail store could be very successful but still not fulfill the most fundamental qualifications for funding.


The US marijuana industry is projected to be worth over $40 billion by 2020 but only if the federal government changes its draconian marijuana policy. In the eyes of the government, any form of marijuana is completely illegal and classified as a Schedule 1 drug alongside heroin and LSD. This policy prevents marijuana businesses from obtaining business checking accounts because banks are subject to federal regulations. Marijuana businesses must therefore only accept cash payments and pay suppliers with cash.

Marijuana has made a lot of people rich but mostly those who already had a lot of money to spare. It is extremely difficult for a new marijuana business to compete against larger competitors because they are unable to work with banks in any way. Marijuana business owners may also have non-violent drug offenses on their records, making them ineligible for marijuana small business loans from the Small Business Administration, which is the largest single provider of business funding.


This may be one of the most untapped industries in the US but also the most unpredictable. As if business loans weren’t risky enough, some of the most promising sexual health products have the potential to not perform well at all or peak for a very short period before rapidly heading downhill. Sexual health products are also purchased by a very specific demographic that is becoming increasingly easy to miss. There’s just no telling when America will be ready to finally put social trepidation aside and embrace the benefits of sexual health products.

But what gives the retailers of sexual health products such a slim chance of being approved for loans is the Small Business Loan Administration’s requirements for eligibility. According to, applicants for SBA loans cannot earn 2.5% of their revenue from products that are “of an indecent sexual nature.” So if you own an adult toy store or even a bookstore that sells a few adult-themed products, you’ll probably be left out of the $19.2 billion the SBA gives in loans every year.

United Capital Source does not reject business owners based on how “risky” their industry is perceived to be. Applicants are judged solely on the performance of their businesses, and our funding experts understand that inconsistencies in cash flow do not indicate a lack of revenue. Call 855.933.8638 or visit the UCS website to find the program that is most appropriate for the unique circumstances of your business!

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