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Can I Get Business Loans After Bankruptcy?

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“Can I still qualify for business loans after bankruptcy?”

It’s a question small business owners and aspiring entrepreneurs who have suffered that fate may ask when looking for financing. If you want a fresh start, a past bankruptcy need not be a life sentence. It is possible to get approved for a business loan after bankruptcy.

Realistically, it will require you to put together a strategy and expend extra effort. And it may take a while and involve a series of baby steps, but in time it is possible to overcome the effects of bankruptcy on your financial prospects.

A bankruptcy will stay on your credit history for 10 years in the case of Chapter 7 and seven years from the filing of Chapter 13. Also, expect your score to plummet — 130 to 240 points depending on your credit score, according to a FICO scoring model. Nevertheless, you can take action to improve your chances of getting that business loan or find capital from alternative sources.



How Do I Get a Business Loan After Bankruptcy?

Getting a business loan following a Chapter 7 bankruptcy or Chapter 13 bankruptcy will be tricky, especially in the current economic environment. The following strategies can help:

1. Get a Secured Credit Card

Secured credit cards require a cash payment as collateral (That’s why they’re called “secured.”) That deposit serves as your line of credit. While it’s not the ideal, secured cards are a way to rebuild your credit and have the functionality of a credit card for purchases.

2. Pay Your Bills on Time

We cannot overstate the importance of paying bills on time. It has the greatest impact on your credit score of all the contributing factors. If you do it long enough, you prove to lenders than you can manage your finances and stay out of trouble.

3. Consider Alternative Lending Options

Banks and other traditional lenders may be reluctant to offer a loan after bankruptcy — federal and state regulators tie their hands. One option is alternative lenders that provide term loans and lines of credit, albeit at higher interest rates and fees. Your chances of getting small business loans for bad credit are higher; just understand the risks and potential liability if you’re unable to make payments.

Revenue-based financing, such as merchant cash advances or invoice factoring is another option — so long as your business is bringing in solid sales. These financing sources generally aren’t that concerned with your credit score, although they may run a soft credit check on your personal or business credit.

Asset-based loans are yet another option worth considering, particularly when approaching a bank.

“Traditional lenders are going to look to cash flow, assets, or some type of security,” said Luis Salazar, a bankruptcy attorney in Miami, Florida, in an interview. “The best security is a strong piece of collateral that you know you could sell to recover your loan.”

Another option, crowdfunding, isn’t dependent on credit scores, but you’ll need to invest in a marketing campaign or have a loyal customer base willing to pitch in.

4. Get a Cosigner

Some lenders allow you to apply for a loan using a cosigner. The risk to the cosigner is that they become responsible for the loan if you fail to make payments on time or, worse, default. Also, they receive no benefits to their credit if you repay on time. Make sure the person understands those risks before signing on the dotted line.

5. Present a Business Plan

Hari R. Ender, bankruptcy attorney, writing for Nolo.com, said, “Before you try to get credit for your business, make sure you have a solid, organized business plan to present to potential lenders. The industry in which you are seeking a loan might also make a difference as to your success.”

6. Share Bankruptcy Details with Lenders

Marina Vaamonde, a commercial real estate investor in Houston, Texas, advises business owners to create a timeline accompanied by a set of factual documents that will allow them to share their bankruptcy story.

“Include an overview of how and why you fell into bankruptcy,” she said. “Have a detailed explanation with examples of how you have been managing your business and finances after the bankruptcy. The presentation should allow the lender to learn more about your situation and have a more positive impact on your application.”

There is a place on your credit report to submit a brief explanation of what major event caused your financial difficulties and how it is different now. Typical causes are divorce, hospital bills, extended illness, or a car accident.

7. Avoid ‘Reaffirmation Agreements’

You may volunteer to make repaying your creditors part of the contract — a “Reaffirmation Agreement” — even if you can discharge your debt. Salazar says that’s a bad idea that you should avoid.

“I’ve often had clients say they want to include paying certain creditors back as part of the terms of the bankruptcy,” Salazar said. “I tell them, you can always voluntarily pay someone back, but don’t file bankruptcy and make an agreement that you will pay them back, even though you feel an emotional and moral obligation. If your fortunes turn, you can always send money, but don’t agree to do that in the contract.”

8. Keep Your Credit Debt Level Low

Keep your revolving credit debt as low as possible — below 20% is best — to show that you are not overextending and can afford to make payments. Also, keep in mind that your personal credit affects business borrowing. (That’s especially true for minority business owners who rely heavily on personal scores.)

“If you are cash poor, make sure you don’t take on more loans post-bankruptcy, as it could hurt you,” said Leslie H. Tayne Esq., founder and head attorney at the Tayne Law Firm, in an interview. “Following bankruptcy, it’s not unusual to get credit card offers. Don’t put your personal credit on the line by taking everything you can and maxing out your available credit.”

She added that lenders will look at your personal credit report to see if you have been managing your finances responsibly. “A credit report tells a lot about a person,” Tayne said. “Getting over-extended again could demonstrate a pattern of behavior, making it harder to get a loan.”

9. Go the Friends and Family Route

If you are still having trouble getting a loan after bankruptcy, consider turning to friends and family. The Federal Reserve Bank 2020 Small Business Credit Study (PDF) found that 56% of business owners have relied on friends or family, as well as personal funds — the biggest source of financing — to finance their enterprise in the last five years.

If you decide to go that route, find someone with good credit who can add you as an authorized user to his or her account. Your credit use gets reported in both your name and the primary account holder’s name. Also, you may be able to get a friend or family member to cosign on a loan. Just make sure they understand the risk.

10. Bide Your Time

Our last piece of advice is to wait. It takes up to 10 years to discharge a bankruptcy. If you can’t wait that long to apply for a business loan, you may have to hold off at least a year and likely longer. Even alternative lenders require a waiting period before they will consider making a loan. SmartBiz, for example, requires a three-year waiting period while Funding Circle mandates seven. Some, like OnDeck and DealStruck, are more lenient. They only need a two-year waiting period.

FAQs About Bankruptcies and Loans

The above points will help you create a strategy to get a loan after bankruptcy and improve your credit scores. The answers to the following frequently asked questions provide additional information about the impact of bankruptcy on business loans:

Can you get new business loans while still in Chapter 13?

Getting a business loan while in Chapter 13 bankruptcy will be tough, but not impossible. The Bankruptcy Code allows you to incur certain types of new debt, but you will need to get the court’s permission and be current on your plan payments.

What happens to my existing business loan if I file a Chapter 7 or Chapter 13?

Filing Chapter 7 bankruptcy discharges any personal liability for the business loan but not the debt itself. The reason is, unless you are a sole proprietor, the business is a separate legal entity and remains responsible for replaying the obligation.

A small business set up as an LLC or corporation cannot file Chapter 13 because it is for personal use only. Sole proprietors can file Chapter 13, however, and reorganize and pay back both their personal and business debts, including loans.

Can I discharge an SBA loan in bankruptcy?

Many people mistakenly believe that because the SBA is a federal agency, loans are not dischargeable in bankruptcy. The truth is, you can discharge an SBA loan. There is a catch, however. If you pledged any assets as collateral, bankruptcy would not remove the lien, and the lender can foreclose on or repossess that property.

Wrap Up

Although bankruptcy will drop your credit score dramatically and stay on your credit file for 7-10 years, you can still qualify for a business loan. And because you could have less debt and cannot declare bankruptcy again right away, some lenders may consider you less of a risk.

Take steps now to improve your personal and business credit so you can demonstrate that you are a better credit manager. Even though some lenders don’t require your bankruptcy to be fully discharged, the longer it has been since you filed and the lower you have kept your debt, the better.

If you are a business owner who is considering filing bankruptcy, speak with a bankruptcy attorney. He or she can explain the laws clearly and show you the best options for protecting your business interests.

Image: Depositphotos.com




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ASK THE MONEY LADY: What you need to know about protecting your credit score | Regional-Lifestyles | Lifestyles

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Dear Greg,

Most people never want to share their social insurance number for fear of a hit to their credit bureau, but unfortunately, you may find it a necessity when asked by your lender, who now needs to ensure identity due to increased consumer fraud.

If you apply for credit at a bank, open a bank account or finance a vehicle, chances are you will need to disclose your social insurance number (SIN).

Many people still believe that they should never agree to an inquiry or give out their SIN number too many times to obtain credit. They think their credit will either become damaged or their credit bureau rating and score will go down. This is sometimes not true – so to help you out, Greg, I’m going to dispel all the myths and also let you know what the banks are looking for.

There are two major credit bureau companies that all financial institutions and merchants use today. They are Equifax and TransCanada Union – agencies that rank and provide an overall score to each person who uses credit.

The system for measuring hits to your credit score is indeed intuitive, meaning it measures and evaluates the type of merchant and inquiry. So, it knows if you are shopping around. If you have several inquiries from different banks because you are rate shopping for a mortgage, you will usually not see any decline in your score, (however, these inquiries must be contained within a 30-day period).

It’s the same thing when you are shopping for a vehicle – multiple hits to your credit bureau from car dealers will not alter the score if contained within 30 days.

But, on the other hand, if you are truly shopping and going to different stores, applying for multiple credit cards, personal and retail loans, or buying items on deferred payment plans, then yes, this will drop your score regardless of the 30-day limit.

Protect your credit

First and foremost, you want to protect your credit. This is the foundation of all lending and is the only way for lenders to judge your creditworthiness for the future. If you always pay your bills on time and have never declared bankruptcy, chances are you will have good credit.

But if you are the opposite, and your credit score is too low, you may find it very difficult to get future credit. Your credit bureau score can range from 300 to 900.

As a general guideline, banks and A-Lenders are looking for clients with scores above 680 and will generally automatically decline applications with scores under 600. Credit card companies are a little more lenient and will go down as low as 530, with auto declines for scores under 500.

Here are some tips to improve your credit and maintain a good rating:

1. Pay your bills two to three days before they are due. Paying them on the due date (especially through online banking) will make you one to two days late. This is recorded on your credit bureau and will definitely lower your score without you knowing it.

2. Do not carry balances on credit cards or personal loans month over month. This means your credit is revolving and will automatically drop your score.

3. Resist the urge to have a lot of open credit cards, even if they have zero balances.

4. You must have some credit. If you had previous bad credit and now are just using cash, you are essentially handcuffing your future. Without re-establishing good credit, the banks will decline you every time.

5. Property taxes and support payments in arrears can also drop your score once they are reported.

6. Mortgage and vehicle payments in arrears once reported (which usually happens after 60 days), are a major hit to your score. Please try to avoid this.

I have heard in the past that some merchants or banks do soft hits to your credit. Please do not get fooled by this. There is no such thing as a “soft hit” or a “hard hit” to your credit bureau. If they have your verbal consent, (even if they don’t have your SIN number) when they adjudicate a consumer credit request, they will hit your credit and it will adjust your score.

Good luck and best wishes,

Christine Ibbotson


Written by Christine Ibbotson, author of four finance books, including the Canadian best-selling book, “How to Retire Debt-Free & Wealthy.” Go to www.askthemoneylady.ca or send a question to i[email protected]

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Bad Credit Credit Cards – Bad Credit Credit Cards – ‘My refund has been sent to a credit card that I cancelled’ – your rights to lost money | Fintech Zoom | Fintech Zoom

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Bad Credit Credit Cards – Bad Credit Credit Cards – ‘My refund has been sent to a credit card that I cancelled’ – your rights to lost money | Fintech Zoom

Bad Credit Credit Cards – ‘My refund has been sent to a credit card that I cancelled’ – your rights to lost money

Thanks to Covid, traders have been processing significant numbers of refunds due to events, such as holidays and weddings, being cancelled.

In many cases, these refunds have been sent back to the credit cards used to pay for the purchase – but this has caused a new problem to emerge in relation to card purchases.

When a trader provides a refund, it usually goes back via the same method as the original payment. So if you pay by credit card, the refund is sent back to that card.

However, many people have cancelled credit cards during the pandemic and have therefore found they cannot access the cash.

So what happens to your refund?

Will I get my money back?



If you’ve cancelled the card, the money will be sent to a holding account

The good news is that your refund is safe, as the money will simply be put into a holding ­account by the card provider.

The bad news is that it can take a long time to retrieve the money.

My advice, if you’re waiting for a refund for goods or services you paid for with a card you have now cancelled, tell the trader immediately and ask for the refund to be paid via an alternative method.

Get the latest money advice, news and help straight to your inbox – sign up at mirror.co.uk/email

Positive balance credit card accounts

When a refund is processed back to a card, it can create a positive balance on your account – usually when you have already paid the most recent card bill.

This potentially presents issues as credit cards are not designed to ‘hold’ money in the same way as a current or savings account.

For this reason, consumers are not encouraged to hold positive balances on a credit card.

If your card has a positive balance and you are likely to use it again soon, your next purchases will rectify the situation.

But if you are not planning to use your credit card again in the short-term, ask the card company to transfer the surplus to your ­current account. Do not withdraw the money via an ATM as this may attract fees.

Credit card cash withdrawals

Financial experts warn that you should not get money out from a credit card as it can have a major impact on your credit rating.

This is because there is a very high interest rate attached to withdrawals and companies will flag any withdrawals up, impacting a customer’s credit file.

Bad Credit Credit Cards – ‘My refund has been sent to a credit card that I cancelled’ – your rights to lost money

Bad Credit Credit Cards – Bad Credit Credit Cards – ‘My refund has been sent to a credit card that I cancelled’ – your rights to lost money | Fintech Zoom

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Workout My Credit Solutions Rises as an Authority in Credit Repair and Financial Education

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Quality of life is impacted by numerous factors, and one of its most significant determinants is a person’s financial health. For the most part, financial stability involves the ability to provide for themselves or their family members without putting a significant dent in their wallets. As a concept, financial stability as well as financial freedom is easy to understand but achieving and maintaining it is a whole new story. Today, millions of individuals around the world are struggling with money issues, some of which are caused by the outbreak of COVID-19. However, there are those contending with bad credit, in particular, as a result of ill-informed decisions, mismanagement, and more. Widely acclaimed for the extent to which it helps clients get their credit into shape, Workout My Credit Solutions, LLC has emerged as a go-to venture that is currently making waves in the industry.

Also Read | Top 9 Upcoming Credit Repair Companies

This emerging powerhouse was launched by Nicole Fisher, a 25-year-old serial entrepreneur who has earned recognition for her all-out attitude toward lending people a hand through her initiatives. Highly cognizant of the impact of bad credit on one’s financial health, she started Workout My Credit Solutions in May 2020 and, since then, has been making it possible for clients to get approved for credit cards, mortgage loans, and auto loans, to name a few.

In just a year, the credit repair company has seen impressive growth, reaching remarkable heights due to its consistent delivery of top-notch services. Apart from restoring one’s credit into its former glory, Workout My Credit Solutions also delivers financial education because it believes in the importance of equipping clients with the knowledge they need to handle their money better. It acknowledges the existing gaps in the current educational system where ample attention is not given to arming people with the skills they need to secure a financially stable future. “Our goal is to help clients understand how credit works while they are in the process of getting it fixed,” shares Nicole Fisher.

Also Read | Top 9 Upcoming Credit Repair Companies

Additionally, Workout My Credit Solutions, under the leadership of Nicole Fisher, enables clients to get pre-approved mortgage loans after having their credit repaired by this five-star company. The additional service is strategically designed and incorporated into its inventory of offerings to translate into reality the dreams of those wishing to own a home.

On track to taking center stage, Workout My Credit Solutions has been on the receiving end of excellent reviews from everyone who has come under its wing. It takes pride in the long list of accomplishments it managed to snag under its belt shortly after its establishment and is set to reach the forefront of the industry in the coming years.

With its dedication to pushing people toward financial freedom, Workout My Credit Solutions is bound to remain an impressive force. As it carves a path toward the summit, it plans to continue serving as a leading authority in credit repair and financial education.

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