Should You Do Business with a High-Risk Company?

Risk is difficult to assess, especially if your growing company may not have the luxury of picking and choosing with whom you do business. The fact is, approximately 20 percent of your prospects in the market today are considered high risk. Another 5 percent are very high risk. On the brighter side of things, 35 percent are considered moderate risk and 40 percent are low risk.

Common sense dictates that you should avoid extending credit to companies that fall into the high- and very high-risk categories — no matter how desperate you are for a sale. Trying to collect money you're owed from such companies can be expensive and difficult.

But remember, there's a difference between extending credit and doing business. High-risk companies are generally aware of their risk status and may be open to requests for advance-payment arrangements or paying with a credit card. Chances are good that they're just as eager to turn around their business as you are for new accounts.