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Can I still get a business loan after going bankrupt?

On Behalf of | Jul 5, 2019 | Bankruptcy |

The stigma associated with going bankrupt can leave Indiana entrepreneurs reluctant to file for Chapter 13 bankruptcy, fearing that doing so will make it impossible to secure business financing for a long time. However, going bankrupt does not mean every lender will shut their doors on you. In fact, in some cases bankruptcy may not affect your ability to find a loan at all. points out that if you have an existing business with its own credit, you can build your loan based upon that credit and not your personal credit. This means that filing for Chapter 13 bankruptcy may not be an impediment to finding a loan if you are running a business that is already established. However, if you want to start a new business, the prospects for securing a loan become more difficult, though not prohibitively so.

When you approach a lender to finance a new business, the lender will want to look at your personal credit score. If you have just exited bankruptcy, it may be a good idea to focus on rebuilding your credit first, since lenders may consider you a credit risk. However, you might not need to wait long. Some lenders will take on bankruptcy filers if the bankruptcy was completed at least two years ago.

Aside from your credit, lenders want to examine your business plan to see if you can run your business well and that your proposed business stands a good chance of generating income. You will need to explain how your business can make money and how you will make the public aware of your goods or services. This is also a good time to show your credentials that demonstrate your ability to run a business, like your educational degrees or business certifications.

If your credit report still seems like an insurmountable obstacle, consider talking with your lenders about what happened to cause you to go bankrupt and how you will improve your spending practices. Some lenders are willing to hear your side of the story while making a decision to approve a business loan. To help your case, consider bringing a co-signer for the loan. A business partner or family member with better credit can encourage a lender to approve your loan.

This article about Chapter 13 bankruptcy is only intended for educational benefit and should not be interpreted as legal advice.