Although you may think the idea of bankruptcy would send lenders running in the other direction, there are still ways to acquire another loan for your next small business venture. Filing for bankruptcy isn’t the end of your financial world as long as you know which steps to take.
Here are just a few ways to secure a small business loan after filing for bankruptcy with your last business….
Bankruptcy and U.S. Businesses
When you’re ready to obtain your next small business loan with bankruptcy in your past, it’s important to remember that you’re not alone. Bankruptcy happens to businesses of all sizes and lenders are aware of this.
In fact, according to the American Bankruptcy Institute, there were 47,806 U.S. businesses that filed for bankruptcy in 2011 alone. Bankruptcy isn’t something to be proud of, but knowing your small business isn’t the first to file for it will give you confidence when heading into your next business venture.
With that said, there are some tips for acquiring your next small business loan after bankruptcy.
Time heals all wounds and such is the case with bankruptcy. In general, your credit report will reflect your bankruptcy for a minimum of seven years and a maximum of ten.
Nobody expects you to wait this amount of time to start your next business, but a little time in between your bankruptcy and your next business loan application helps.
Waiting the full amount of time will wipe your slate clean, but many lenders are willing to give you a loan if you wait for at least two years after your bankruptcy.
Have a Solid Business Plan
Whether you have a bankruptcy in your history or not, lenders love entrepreneurs with a well thought-out business plan.
According to the following article, Bankruptcy and your credit, have everything to do with obtaining vehicle loans and getting approved for equipment and office space leases for your business.
By coming to the table with a business plan that accounts for every aspect of your new business, lenders will be more willing to fund your business.
If you’re passionate and confident with your new business venture, then the business plan should come easy. However, consulting a professional business planner is always helpful.
Keep a Steady Income
Actions speak louder than word, especially when you’re trying to rebuild your credit and your finances. One of the best ways to impress lenders is to prove to them that you’re financially responsible in your personal life.
Keeping a steady income with little to no debt is a great way to put your bankruptcy behind you and go into your next business financially prepared.
Explain Your Case
Sometimes explaining your case can make all the difference in the world to lenders. Whether your bankruptcy was caused by illness, divorce, or a catastrophic event, you can prepare a factual explanation that goes along with your credit report.
This statement is read by lenders during the business loan application process and can help you plead your case from the start.
By keeping in mind the tips above, you’ll take your bankruptcy out of the equation when applying for your next small business loan.
About the Author: Adam Groff is a freelance writer and creator of content. He writes on a variety of topics including small business and finance.