Declaring bankruptcy might be a viable solution if you are overwhelmed with business debt. However, it can affect your ability to get a small business loan. If you don’t have the cash to cover everyday business expenses and start or grow your operation, this can be problematic.
Bankruptcy is a legal process that can help individuals and businesses get rid of all or part of their debt or repay a portion of what they owe. There are three types of bankruptcy which are the following:
Bankruptcy can stay on your business credit report for up to 10 years. When lenders pull your credit and see bankruptcy, they’ll automatically view you as a risky borrower. They might deny you for a loan or extend an offer with a high interest rate and unfavorable terms.
The good news is that the effect of bankruptcy on your credit score will lessen over time. As long as you make timely payments and prove that you’re a responsible borrower, you will be able to get funding in the future.
It can be tricky to get business loan after being bankrupt but it’s not impossible. The following steps will help you increase your chances of getting approved for the financing you need to successfully run your business.
You might be tempted to look for business loans after business or personal bankruptcy right away even if your case is still open. If you’d like to boost your likelihood of securing a loan, wait until your case has been discharged.
After this waiting period, check your credit report to ensure that the discharge is noted. If it is, you can start your loan application.
Keep your debt to a minimum and pay off as much debt as you can as fast as you can. It is essential to do this if your goal is to rebuild your credit score.
In most cases, business lenders won’t approve you for a loan if they find out that you’ve filed for bankruptcy. However, there are some lenders with more lenient business loan requirements who are open to borrowers with bad credit, as well as those who have been through bankruptcy.
Take the time to create a thoughtful, comprehensive detailed plan as lenders will likely look at it when they review your application for a loan.
Bankruptcy may give your business the fresh start it needs. However, it can also make it a challenge for you to obtain a loan. Fortunately, you can navigate the situation and obtain the financing you need. It may just take some time and strategic planning.