An important thing to remember if you’re facing bankruptcy is that it does not mean you have failed, that’s not its intended purpose. Instead, the U.S. Bankruptcy Code is allowing you or your business to start anew and rebuild.
It’s not unusual for a business to close after filing for bankruptcy, but choosing to apply for a small business loan does not necessarily mean that your application will be automatically rejected. In fact, several businesses manage to make it out of bankruptcy, particularly due to circumstances largely out of the business’s control, like the closure of a roadway that removes customer access or fire. However, if your business does end up filing for bankruptcy, a small business loan is feasible, albeit not easy either.
A report released in 2011 by the U.S. Small Business Administration shows that businesses that have previously filed for bankruptcy were 24 percent likelier to have a loan denied. Since a bankruptcy will negatively affect your credit and will remain on your report for a minimum of seven years, it will be tricky but it is still possible to get a loan before the bankruptcy is removed from your report.
If you’re looking to explore small business loans, keep in mind that a lender will be evaluating your business as a whole, and they each have their specific criteria for determining your eligibility. Some companies will be more understanding if for example your bankruptcy happened during the 2008 recession while others will focus more on what circumstances lead to bankruptcy. Take some time to shop around and you may find a lender willing to help your business get back on its feet.