Getting a business loan is tough work for everyone, including those with near perfect credit. Lenders want a plan that details every aspect of how you plan to use your loan, as well as the details about your personal and business credit history. Flaws in your credit history can damage your ability to get a loan, but a bankruptcy may mean automatic denial.
To a lender, a bankruptcy says that you were previously unable to manage money – whether in your personal finances or in your business. Furthermore, lenders may be reluctant to loan money to someone who is comfortable with the bankruptcy process, because if you file bankruptcy again in the future, you will no longer be legally liable to repay the balances on your business loans.
How You May Qualify for a Business Loan after Bankruptcy
There are some circumstances in which you may be able to qualify for a business loan following bankruptcy. The most important detail is how much time has passed since your last bankruptcy. If it has been more than seven years, the bankruptcy is likely no longer a part of your credit history and it may have no impact at all on whether you can qualify for a business loan. If the bankruptcy is still on your credit history, but was several years ago, you may have had time to rebuild your credit using co-signers and secured credit cards. However, if the bankruptcy is fresh – as in less than two years – you are unlikely to be able to qualify for a business loan.
You may, however, have other solutions if you are denied a loan due to a recent bankruptcy. For example, you may be able to obtain a secured business loan instead of an unsecured loan, but you’ll have to use some of your business assets as collateral to secure it. Also, be prepared to pay higher interest rates due to a perceived higher risk of default.