How to Build a New Business After Bankruptcy

bankruptcy-paperwork

There are always challenges with starting and building a business. It can be even more difficult to do so after filing for bankruptcy, especially when you need a loan to start your company. The bankruptcy court can be hesitant to grant permission if you need to take on more debt. In most cases, it’s unlikely a creditor will loan more money if you have a fresh bankruptcy.

However, there are options a Los Angeles bankruptcy attorney can help you consider. One possibility is to seek a lender that works with borrowers who have bad credit, although the interest rate may be high. Another option is to wait until the bankruptcy has been discharged, at which time you’re free of court supervision. Whether you complete Chapter 7 bankruptcy in a few months or Chapter 13 over three to five years, the wait time may be prohibitive if you want to get a business off the ground and start improving your financial situation.

If you’ve recently filed for bankruptcy, here are a few tips for starting a new business:

  • Open a business that doesn’t require financing: Many home-based businesses require little up-front investment. For example, you can start a housecleaning, dog walking, consulting, or online business without borrowing any money at all. Sometimes all you need is a computer with Internet access. The gig economy is providing independent contractors with many different opportunities.
  • Borrow money from family and friends: Obtain capital from someone you know, using a loan contract or IOU to set up your terms for repayment. You can then get the funds needed to jump-start your business without conflicts involving the bankruptcy court.
  • Seek a co-signer on a loan: A co-signer with satisfactory credit can open the door to receiving lower interest rate funding from a financial institution. If you default, the co-signer (by agreement) will continue to repay the loan.
  • Find cost-effective solutions: Borrow tools and equipment from friends, family members, and neighbors, or pay cash for items from vendors. Selling more products can give you the capital to afford these, while advertising with fliers and online bulletin boards can save you on marketing your business.
  • Draft a business plan: Any lender is going to look at your business plan to understand what type of business it is and assess the potential for profitability.

Improving Your Odds of Financing Approval

Banks and other lenders will look at your personal credit history when you apply for financing. Having a business plan is just one step that can help. You can also look to investors for funding. Or, you can seek financing from small community banks or local organizations that specialize in business financing or grants.

Other Tips to Help Your Business Get Going

Once you declare bankruptcy, you will need a new tax or employer identification number. Also, business taxes are your personal responsibility, so pay this debt to be free of large tax bills. Expect financing to be tight. You, therefore, want to make sure you’re getting paid, but don’t be overly tough on customers with payment terms, or the payments may not come in.

Consult with OakTree Law

Working with a bankruptcy attorney can help navigate the bankruptcy process and provide insights into building your new business. Call our Los Angeles or Orange County bankruptcy attorney at 562-219-2979 today. You can also request a free evaluation online to receive help weighing your options and making the best choices.