Qualifying for a Business Loan After Bankruptcy

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Bankruptcy is often falsely associated with failure. But this is hardly the case, as the U.S. Bankruptcy Code was designed to provide people and businesses with a fresh start and a chance to improve their financial situation. Bankruptcy doesnโ€™t always result from oneโ€™s financial habits. A fire or sudden loss of customers can cause you to go bankrupt, but businesses in these situations have a better chance of surviving.

Your business may still exist after a bankruptcy filing, a discharge of debt, or establishment of a payment plan. But can you still apply for a business loan to get the capital you need? Here is how a bankruptcy filing will affect your eligibility for a business loan.

  • Bankruptcies reduce your credit rating and stay on your credit report for seven to 10 years.
  • Depending on the lender, you may not be eligible for a loan for one to seven years.
  • You canโ€™t file for bankruptcy again for a predetermined number of years.

This shouldnโ€™t stop you from shopping around for loans. Lenders may still be willing to approve your loan. The U.S. Small Business Administration conducted a study, and its 2011 report found businesses with past bankruptcies were 24% more likely to be denied requests for funding.

Bankruptcy shouldnโ€™t prevent you from moving forward. You CAN secure a business loan even if you have previously filed for bankruptcy. OakTree Law has a team of world-class Los Angeles bankruptcy attorneys that can help you navigate the process and get you back on your feet again. Call us today: 562.219.2979

How Can My Business Still Qualify for a Loan After Bankruptcy?

It depends on the lenderโ€™s policies. For example, you might qualify for a loan if itโ€™s secured by your accounts receivables. The creditworthiness and current health of your business may factor in as well. Of course, the longer since your bankruptcy, the better, but some lending companies are more concerned with the reasons for filing than when it happened.

If the lender is more concerned with the circumstances surrounding your bankruptcy and the health of your business, you can qualify for a loan by:

  • Presenting a business plan that identifies your industry and how you plan to succeed; the lower your chances of failure, the higher the likelihood of approval.
  • Keep your debt to a minimum to show the lender youโ€™re serious about a fresh start and are financially responsible; financial statements help in proving your creditworthiness.
  • Show proof of income; if it looks consistent, your lender will consider whether you can repay a loan, but the chances of a reduction of income must be low.

Each lender has its own rules to determine whether a business is eligible for a loan. To improve your odds of approval for the loan youโ€™re asking for, search for small business lenders and inquire about their policies. It is feasible that you may qualify for a small business loan even if you donโ€™t think you will. But remember that the interest rate may be higher. You may also be required to use equipment or even property as collateral, which youโ€™d lose if you end up defaulting on the loan. And thereโ€™s still hope if you get a denial. Cosign with someone who has a good credit history and the lender may see the deal as less of a risk.

Bankruptcy shouldnโ€™t prevent you from moving forward. You CAN secure a business loan even if you have previously filed for bankruptcy. OakTree Law has a team of world-class Los Angeles bankruptcy attorneys that can help you navigate the process and get you back on your feet again. Call us today: 562.219.2979