How to Get a Business Loan After Bankruptcy
Hundreds of years ago debtors were sent to prison for failure to pay debts. Now, while you won't have your freedom taken away from you, you may have to file for bankruptcy, which can feel like financial handcuffs. The secret is in the mindset. Entrepreneurship requires creativity in your business idea, marketing and funding. The less money you have, the more creative you will have to be. While securing a loan may be difficult, it is not impossible. Again, it's all about your mindset.
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Instructions
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Contact a community credit counseling service in your local area. They will be able to provide specific information about your options and resources available to you within your local area (usually at no charge). Specifically, you want a list of lenders who give business loans to individuals with a bankruptcy.
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Start a business in an industry prone to success. Some banks are loath to give funding for certain business models with low margins, such as restaurants, as they have a high failure rate.
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Prove that your business can generate cash flows. Unlike personal loans, business loans are awarded based on your ability to bring in cash flow, not your ability to pay off the loan. The two are not mutually exclusive, but this does provide a window of opportunity.
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Write a business plan which highlights 1) the track record of success for the management team, 2) quarterly cash flow projections for three to five years and 3) how soon you can pay back the loan in years. All three of these points should be highlighted in the executive summary. Be sure to explain and validate all assumptions. One error can ruin your chances for getting the loan.
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Prepare yourself for questions and don't take anything personally. You want to personify your loan application/business plan as well. You might even want to include a letter explaining your situation, especially if the bankruptcy was due to a divorce or medical issues. The banker's job is to protect the assets of the bank, not hoard them. The more you can help her create an argument for the Risk Manager at the bank, the better your chances.
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Create a "cushions of protection" list. Cushions of protection are any asset you can pledge against the loan. This can be anything (including your retirement fund or other investments) that can be liquidated in case of default.
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