Can I Get a Business Loan after Filing for Bankruptcy?

For small-business owners facing overwhelming debt, declaring bankruptcy can be the best way to pave a path forward. Yet it can also make it difficult to get a small business loan, which is often essential to facilitating growth. Fortunately, all is not lost. Check out our guide to learn how to get a business loan after filing for bankruptcy.

Bankruptcy is a legal process that allows small-business owners to eliminate their debts (or set up a repayment plan) when they’re overwhelmed by their finances. Some business owners file for bankruptcy in order to quickly shut down a company or to keep a business operating in the face of mounting debt.

Bankruptcy remains on a business credit report for up to ten years and typically causes a business credit score to drop dramatically. This sudden and significant drop makes it difficult to get approved for small-business loans and unsecured credit cards.

Though the outlook may seem glum for a small-business owner who has filed for bankruptcy, we’re here to offer some hope. It is possible to get a business loan after filing for bankruptcy. However, it definitely takes some extra work.

Because you’ve filed for bankruptcy, you can’t expect to qualify for the average business loan. You’ll need to shop around, learning about alternative lenders that may be more lenient on their small business loan requirements.

A business plan is key to the success of any small business—and even more so when you’ve filed for bankruptcy. Take time to outline your financial state, business goals, and operational plans to show that you will be able to repay your loan.

Naturally, lenders will want to know why you’ve filed for bankruptcy. So beat them to the punch by writing a bankruptcy statement, which gives an honest, brief explanation of what led to the bankruptcy.

From the perspective of a lender, a cosigner with good credit greatly reduces the risk of lending to someone who has filed for bankruptcy. Keep in mind, though: a co-signer must be prepared to assume liability for any debts you aren’t able to pay.

Small-business owners who have filed for bankruptcy should take heart. It’s still possible to get a business loan—but it will require some added steps. By keeping debt down, shopping around for a more lenient lender, and finding a cosigner, bankrupt businesses can still get access to the capital they need to thrive.

Would you like to learn more about small business loans and bankruptcy? Check out Best Small-Business Loans with No Credit Check 2022 on Business.org.

It is possible to get a small business loan after filing for bankruptcy—but that doesn’t mean it’s easy. Bankrupt business owners will likely need to shop around for a loan, be prepared to explain the cause of bankruptcy, and show that their finances are in good standing before qualifying for a loan.

Here are other strategies that help business owners obtain an SBA loan after bankruptcy:

• Keep debt down.
• Get a secured credit card.
• Pay bills in a timely manner.
• Present a detailed business plan.
• Show consistency of income.
• Get a cosigner.

Yes, you can start a business after filing for bankruptcy. However, it will probably be more difficult to qualify for a small business loan under these circumstances. If you’ve recently closed a similar type of business, it may also create obstacles in setting up a new business.

The best way to increase the chances of qualifying for an SBA loan is to create a comprehensive business plan, keep debt down, explain the cause of bankruptcy, and get a cosigner.

It is often difficult to get a loan after bankruptcy—but it isn’t impossible. Business owners seeking a loan after bankruptcy will probably need to shop around for a lender, be prepared to explain the reason for the bankruptcy, and demonstrate financial stability.

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