Is Getting an SBA Loan Possible After Bankruptcy?

Can I qualify for an SBA loan after bankruptcy? It is one of the most common questions small business owners and young entrepreneurs ask who are having difficult times and are on the verge of closing. Though you may have to face an assortment of financial aftermaths when your file for bankruptcy, it doesn’t mean giving up hope. 

It can be hard to secure an SBA loan after bankruptcy because it can stay on your credit report for seven to ten years. So, if you’re applying for an SBA loan for small businesses after 7 or 10 years, then it likely won’t have an impact on your application. 

However, if the cloud of sorrow has recently hanged over your business, then your lenders may consider several factors before approving your loans such as type of bankruptcy, reasons behind bankruptcy, current lending conditions, and the level of risk. Yet, developing a smart strategy and focusing on the below factors can improve your chances of getting an SBA loan after bankruptcy for your small business. 

Take Your Time

SBA lenders may be unwilling to offer you a loan with a fresh bankruptcy. Even if you’re able to qualify for some reason, you won’t find affordable terms and rates. While there is no fixed time specified to apply for an SBA loan again, it’s recommended to consider your application after two years to look better in front of lenders. Give this time to rebuild your credit and evaluate the problems. 

Rebuild Your Credit

It’s vital to start building your credit after bankruptcy if you want to avoid getting yourself into further hot water. Though it can be difficult to rebuild your credit during challenging times, you can make it possible by creating a budget, monitoring your credit cards, building an emergency fund, keeping your balance small, and practicing good financial habits. Following these rules can help make your loan application stronger when you apply for an SBA loan for small businesses after 2-3 years.

Limit Your Outstanding Debt

Try to keep your outstanding debt below 20% to assure your lenders that you’re a responsible for business owner and can repay the borrowed amount. Besides, limiting your debt is a great way to gain the trust of SBA lenders and make them confident that you can repay any amount even after bankruptcy. 

Present a Strong Business Plan 

Before approaching a lender or applying for an SBA loan for small businesses, it’s imperative to have a solid business plan for why you need the amount and how you’re going to use and repay it. Outline your business objectives, what products and services you offer, your competitors and targeted customers, and more to increase your chances of being approved for the loan after bankruptcy. 

Look for Alternative Lending

Due to federal strict regulations, it may be very tough to get SBA loans for your small business. There are a few alternative lenders online who could provide you with bad credit, line of credit, and short-term loans. Though these lenders may ready to consider your loan application, it can adversely affect your finances if you fail to make payments. 

Bottom Line

Though it’s difficult to get an SBA loan for your small business after bankruptcy, it’s not impossible. Fortunately, there are some options to get your business back on track. You may use online lending platforms to find and compare the best SBA loan offer for your business.