Getting a Business Loan After Bankruptcy

Running a small business after bankruptcy can be difficult, especially because it can stay on your credit history for as long as seven to ten years. Just because you had a bankruptcy doesn’t mean getting a bank loan is out of the question either. With a few extra preparations, you can overcome that financial blemish and keep your business flowing with funds.

1. Address the Elephant in the Room

It can be embarrassing to air out your fiscal dirty laundry with strangers, but being upfront about your bankruptcy is the best strategy. Prepare a few sentences explaining the causes of your bankruptcy (i.e. divorce, medical catastrophe, etc.) and include these on loan proposal documents. You can also go into your credit report and attach a 100-word explanation. Lenders will see this when they pull your credit and may be more likely to consider your application if they have background information.

And of course, be sure to explain it in person with any lenders you work with.

2. Provide Proof of Positive Performance

Most small business loan applications will ask you to provide a business plan. In your case, yours will need to be extra solid to attract the attention of the lenders. Be prepared to show how you have managed your finances better after the bankruptcy. You will also need to provide proof of sufficient income and that you have kept your debts low since filing for bankruptcy. Give the lender ample evidence that you are not headed toward the same financial troubles again.

3. Find the Right Lender

If you receive rejections from large, national banks, you may want to start talking with lenders at your local banks and credit unions. They may give you more face time and allow you to fully explain your situation, making it more likely your application will be approved.

While a loan post-bankruptcy may come with higher interest rates, it is still possible to obtain. Just do your homework and show lenders that you are making a real financial comeback.


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