Will Bankruptcy Stop Me From Getting a Small Business Loan?


If you’ve got an eye on an entrepreneurial venture, the thought of filing for bankruptcy might be especially scary. Will bankruptcy kill your dreams of business ownership for good?

The short answer: “Probably not.” The long answer takes a little more explanation.

Your personal credit score will improve.

Sure, the narrative the credit card companies like to spin says the exact opposite. But credit scores go up immediately after a bankruptcy discharge.

Think about it. All those collection items are gone. Your debt-to-income ratio has shrunk. You have cleaned a whole lot of noise off your credit report, and you’ve got more room to make the rest of your payments on time.

Do you want to run out and try for a business loan the day after you get your discharge? Probably not. But you don’t necessarily have to wait years, either. Some people find getting a post-bankruptcy small business loan is even easier than getting a mortgage.

There are plenty of bankruptcy-friendly business lenders.

Nerd Wallet has published a reasonably comprehensive list. And the list only includes online banks. It doesn’t offer any information on local banks or credit unions who might be willing to take the risk.

And if you get denied there are ways to strengthen your position: by providing collateral, working to rebuild your credit score, or by improving your business profits. You can also find alternative funding options. Or find a way to run your business and grow your profits without taking on more overhead than your personal budget can handle.

Creative problem solving is the essence of being a business owners, so keep searching for solutions and don’t get discouraged.

The health of the business will matter more than your personal credit.

We’ve already touched on this a little, but it deserves a point of its own. 

Loan underwriters look at the health of the business far more than they look at the credit of the owners. If the business already has strong sales and plenty of money flowing in then the business itself secures the loan.

If you’re focused on building the very best business you can, chances are you’ll get the money you need to grow, one way or another.

Plenty of millionaire business owners have bankruptcies in their past.

And if you thought for a minute you could name plenty of Fortune 500 companies who have been in and out of bankruptcy, too. 

There are so many success stories of millionaires and entrepreneurs who had to declare bankruptcy. It’s a popular trope because it’s so true. 

These people were certainly able to launch new ventures after their bankruptcy discharge.

And you can, too. 

See also:

It’s Time to End the Stigma of Bankruptcy: Here’s Why.

5 Successful People Who Bounced Back from Bankruptcy.

4 Reasons You Should Never Be Ashamed to File for Bankruptcy.

Why Bankruptcy Raises Your Credit Score.

Will Bankruptcy Impact Your Career in Philadelphia?


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