If you’ve applied for a small business loan after filing for bankruptcy in The Woodlands, TX, are the lenders going to laugh you out of the office, or will you be able to fund your venture? Many small business owners and entrepreneurs want to know what will happen if they try to get funding for their next great idea.
Here’s the bad news: it will be harder. You will have the bankruptcy on your credit report for seven to 10 years, depending on the type you file, and your credit score could fall by as much as 130 to 240 points.
But here’s the good news: bankruptcy does not mean that you can’t get a small business loan in The Woodlands, TX. In fact, you might be able to take your hard lessons learned and translate them into something extremely profitable. Lenders will take into account not just your credit history, but the way you handled it—you can attach a brief note of explanation to your application. For example, personal bankruptcy due to medical bills is more “forgivable” than simply refusing to pay a business lender.
How to get a small business loan after bankruptcy
Wondering about the steps you’ll have to take to secure a loan for your small business after filing for bankruptcy? Here are some tips:
- Secured credit cards: Secured credit cards use a cash deposit to use as collateral. It’s not quite the same as regular credit cards, where you can expense major items without having to worry about them, but it does help you establish a better credit history.
- Recent good credit history: Speaking of good credit history, the better your or your business’s credit history, the more likely a lender will be willing to look past your bankruptcy—especially if it was for unavoidable personal reasons. The best way to improve your credit score is to pay your bills on time, all the time, every time.
- Alternative lending options: You can always look into alternative lending sources, although those may be difficult based on their higher interest rates and other fees. You might also consider asset-based loans, which use your high-value assets (such as real estate) to come up with a loan. Just make sure you understand what you’re getting into, and what you stand to lose if you’re unable to meet the terms of your loans.
- Cosigners: Cosigners are a time-honored way of reducing financial risk. Remember that if you default on your loan, your cosigner is still responsible for that debt—and to be ethical, you need to make sure they fully understand that obligation as well.
- Show a business plan: Lenders are often impressed by a well-thought-out business plan that fully acknowledges your past bankruptcy. This shows that you’ve accounted for all possibilities, including negative ones, and makes lenders more eager to work with you.
Are you thinking about filing for bankruptcy (or already have)? Talk to James R. Jones, Attorney at Law to find out more about how your bankruptcy can affect your chances of getting a small business loan in The Woodlands, TX.