Industries lenders consider high risk, and what to put in front of them if you're in one

Lenders treat an industry as higher risk when businesses in it fail more often, earn income in lumps, own assets that resell badly, or live and die by a licence or one big customer. Construction and accommodation and food services sit at the top of the insolvency tables, so they draw the most caution. But “higher risk” is where a lender starts, not where it ends. Your own numbers can move the answer.

If you’ve just been knocked back, or priced up and asked for more security, with a sentence like “it’s the industry”, this guide explains what that actually means and what to hand the lender next.

Is there an official list of high-risk industries?

No. There’s no regulator-issued list. Each lender writes its own credit policy, and those policies are internal. Some sectors are capped (a limit on how much total lending the lender will hold in that sector), some need extra documents, and a few are avoided altogether. What the policies have in common is the data behind them, and that part is public.

ASIC publishes insolvency statistics by industry. In its 2023–24 figures, more than 11,000 companies entered external administration for the first time, and three sectors made up over half of them: construction at 27%, accommodation and food services at 15%, and other services at 9%.

The pattern hasn’t gone away. Trade press reporting on the latest ASIC series for 2025–26 puts company insolvencies at roughly 14,000, with construction again first (about 3,400 companies) and accommodation and food services second (about 2,000). Accountants Daily’s summary notes the rate dipped slightly but stayed above its long-term average. Treat those exact counts as provisional until you check ASIC’s own tables, but the ranking is consistent year to year, and that consistency is what policy writers lean on.

Why do lenders flag some industries? The five questions behind the label

A flagged sector usually fails one or more of these tests. Knowing which one applies to you tells you what to address.

1. How often do businesses like this fail? The insolvency data above. Large sectors produce large counts, so a lender also thinks in rates, but the headline number still shapes policy.
2. What shape is the cash flow? Builders and developers are paid on progress claims and completion. Hospitality is paid daily but carries heavy wages and rent. Farms are paid at harvest. Lumpy income makes repayments harder to schedule.
3. What’s left if it goes wrong? A tractor, a truck or a dental chair resells. Fit-out, bespoke machinery and stock that dates quickly don’t. (We cover this in specialised equipment as loan security.)
4. Does a licence or registration hold up the income? If a licence lapses, trading stops. Licences lenders check lists the common ones.
5. Who pays you, and how reliably? One head contractor, one processor or one platform can account for most of your revenue. That’s concentration, and it matters in any industry.

Which industries tend to get the extra scrutiny?

Based on the insolvency tables and how the five tests land, these come up most:

Sector	Why it’s flagged	What helps most
Construction and trades	Highest insolvency count; progress-claim timing; subcontractor chains	Work-in-hand schedule, contracts, payment history with head contractors
Cafés, restaurants, takeaway	Second-highest insolvency count; thin margins; fit-out resale	Consistent daily takings in bank statements, lease term, wages ratio
Retail	Stock risk; discretionary spending; retail features among the larger insolvency counts	Stock turnover, supplier terms, online share of sales
Other services (salons, repairs, personal services)	Third-largest share; low asset base	Repeat-client share, booking data
Transport and freight	Fuel, wages and contract concentration	Contract terms, fleet age, telematics or fuel records
Cash-heavy businesses	Hard to verify income	Banked takings, POS reports, BAS that reconcile

If your industry isn’t on the table, don’t assume you’re in the clear. Lender policy is more granular than ASIC’s broad categories, and sectors like childcare, events and tourism carry their own cautions.

What can I show a lender to change their view?

The goal is to separate your business from the sector’s average. Lenders respond to evidence, not reassurance.

Show cash flow that doesn’t look like the sector’s weak point. If you’re a builder, a schedule of signed jobs and a clean record of being paid on time answers the progress-claim worry. If you run a café, six or twelve months of steady banked takings does the work.

Use a neutral yardstick. The ATO’s small business benchmarks cover about 100 industries, and the latest set (released March 2026) uses 2023–24 data. If your cost of sales, labour and rent ratios sit in the typical range for your sector, you can say so, and it’s a number the lender trusts. If a ratio sits outside it, explain why before they ask. Our guide to ATO benchmarks walks through it.

Get your code right. Lenders read your ANZSIC code as shorthand for your sector. The ABS classification is by main activity, and a more accurate code sometimes lands in a different policy bucket. Don’t pick one to look safer. Pick the one that’s true. See ANZSIC codes and business loans.

Add security. A secured loan shifts the question from “how risky is this sector?” to “is this property or asset worth enough?” That’s why secured business loans are often available when an unsecured application in the same industry is declined.

Name your customer mix. If no one customer is more than a quarter or so of revenue, say it. If one is, show the contract and its term.

If you’d rather have someone sanity-check how your file reads before you apply anywhere, check your options here.

A worked example (illustrative only)

Picture a small formwork contractor with $1.6m turnover. A lender sees “construction”, a sector with the highest failure count, and asks for a property as security. The owner doesn’t have one to offer.

The owner returns with three things: a list of six active sites with signed contracts, twelve months of bank statements showing progress payments landing within 30 days, and an ATO benchmark comparison showing labour costs within the typical range. None of that changes the sector. It changes the lender’s picture of this business. The conversation moves from “can’t do it” to “what size and structure suits the cash flow?”, and a cash-flow or line-of-credit facility becomes possible.

This is an example only, and no outcome is guaranteed, but the sequence is the one that works: sector concern first, then evidence that answers that concern specifically.

Does bad credit make an industry problem worse?

It can, because two flags stack. A sector label plus a default or an ATO arrangement means the lender has two reasons to be cautious instead of one. That’s when matching matters most: some lenders are comfortable with the sector but not the credit file, and others the reverse. Our page on bad credit business loans explains how those cases are assessed, and a mark on the file is considered case by case rather than being an automatic no.

If you’re not sure how your industry reads to a lender, the industry finder shows what businesses in your field typically borrow for.

What if my application was already declined?

Ask what the reason was in plain terms: sector policy, serviceability, security, or credit history. They lead to different fixes. If it was sector policy, a different lender or a secured structure often changes the answer. If it was cash flow, the next three months of statements may matter more than any document you can prepare today. Reapplying to the same lender with the same file rarely helps, and repeated hard credit checks leave their own marks, which is worth keeping in mind before you submit anywhere else.

Ready to find out where your business stands?

Being in a sector with a reputation isn’t a reflection on you, and plenty of builders, café owners and retailers get funded every year. What matters is how your business reads to the person looking at it. We look at industries every day, so we know which strengths to pull forward for yours.

Enquiring takes about 60 seconds, and asking doesn’t touch your credit file, so you can find out where you stand without it costing you anything later. We don’t send your details to a pile of lenders, so your phone won’t light up with strangers. A real person reads your situation, thinks about how your industry works, and calls you. One request: fill the form in accurately, because the right match first time depends on it.

See if you qualify →