Can I get a loan after bankruptcy?
Dayzon Johnson, CEO, Ice Cold Music, Clarksville, Tenn.
I own an independent record label that I started two years ago. It's growing quickly, and I'd like to get a bank loan to help me expand. But I have a bankruptcy on my personal credit record. Will this make it impossible for me to get bank credit for my business?
By Anne Fisher, Fortune Small Business contributor
Dear Dayzon: Not necessarily. "Bankruptcy used to be the financial equivalent of a scarlet letter," notes Jim Lynch, CEO of Leaders Bank in Oak Brook, Ill., which lends almost exclusively to entrepreneurs. "These days we're more willing to listen."
He notes that a recent Harvard study shows that catastrophic medical expenses are the top reason for personal bankruptcies in the U.S. "These could befall anyone, so a bank is unlikely to hold them against you. But if the bankruptcy resulted from poor judgment" – an ill-advised shopping spree, for instance – "I'd probably take a pass."
David Waltzer, a New York City bankruptcy attorney, says that a bankruptcy is "like a loud noise – a big jolt with echoes that fade in time." He says that many people erroneously believe bankruptcy will ruin their credit forever. "By law, the maximum time that a bankruptcy can stay on your credit record is ten years, but the credit agencies will often expunge it long before then," he says. "If your income is steady, you've kept your debt low, and you're paying your bills on time, banks may be willing to lend to you." So why not apply?
If banks balk, consider alternative financing sources. "If the business is growing and you can show two years of solid financials, a small equity investor may be willing to overlook a past personal credit problem," says Rick Singer, CEO of RaiseCapital.com.
Singer's firm in Port Washington, N.Y., is among a growing number of companies that connect small-business owners and investors. Gobignetwork.com and fundinguniverse.com are two other options.
"Disclose your credit problem, but wait until a potential investor has gotten to know your business and shown interest in it," he says. Of course, you would need to give up some equity to attract outside investors. But for a well-timed capital infusion, it might be worthwhile.
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From Bellevue , WA I filing a bankruptcy and I want to know How soon I can try get a loan or credit cards?
When I got a bankruptcy and i want to get loan for my business, I will be able to get the loan or not?
From Florida Sure you can get a loan… but your interest rates would be very high…
After I filed, I wasn't able to get credit cards or loans for awhile… So I used pre-paid/secured cards… I found a great source of them at http://www.cardtrak.com/cards/categories/secured.html
From andrea valk jonesborough TN my bankruptcy was just discharged i need a loan to pay back and rebuid my credit i make good money with communications company for 5 years 2 months mr worcester can u help
From Holly, CO Let me tell you something alright? Leading up to the time that we had to take out a cash loan, we didn't see anything but negative remarks from others online about the cash loan industry. We ended up almost losing our car because we waited. At the last minute, we borrowed $400 from http://www.cashloancity.com and I really believe it is the only thing "at the time" that saved us. I understand that there's a problem with some people abusing this industry and crying about it later, but what about the people that really need it and pay it back on time? We're even getting ready to have a positive mark on our credit because of it. Why are the people that never need this type of loan the same people that keep others from being able to get one?
From Julia eCompetitors, New York, NY, www.ecompetitors.com It will be much harder to get you a loan now, but this is still possible. However, you must have large profits and very good tax return, because they need prove of your ability to pay back. Good luck.
From Mike , Texas Being denied for a loan/line will not hurt your credit report. The inquiry is what hurts your credit score.
Personal Bankruptcy is a death sentence on a business loan. In order to overcome it you must have the following.
A very low DTI (Debt to Income) ratio. Banks want to see lots of working capital accrued as well as strong tax returns. Having a track record of responsibility since your bankruptcy is key, no slip ups at all. One 30 day late payment shows you havent learned your lesson.
Simple, prove your business is thriving through strong financials,show credit management since bankruptcy, and display low amounts of debt and you will be fine.
From drew, louisville, KY john,
i noticed your response on here regarding being able to loans for people just out of bankruptcy. i have a client that may need to talk to you. email me with your contact info.
From PJ, Westport CT How do we get in touch with you?
From cjlee , seoul Korea In my opinion, you should not confused enterprise of personel. if your company are able to take a bank loan depanding on its credit rates not yours.
why do you visit your neighber bank.
From charles greenville nc How can you get a bank to make a settlement on a judgement
From Lisa, Knoxville, TN As someone with a past bankrupcy who received a loan just a short month and half ago, I'll give you my advice:
*Take the time to develop your credit. Pay off credit cards in a timely manner. Pay other bills on time and in full. Avoid the multiple small credit line, high interest rate cards that will flood your mail box.
*Go to a banker/bank who knows you. I received my loan from the credit union who holds my mortgage. I'm sure my track record of not missing a payment or being late with a payment is what got me the loan.
*As far as the assertion that financers don't care about bankruptcies anymore, that's just not true. I had impeccable credit up to the six months prior to the tragedy that led to my bankrupcy; it didn't change a thing in the intervening years. Be patient. Use the resources you have, including your desire to succeed. Know things will turn around.
Good Luck!
From Austin Clark, Jackson, MS Obtaining a loan after bankruptcy is a possiblity although it can be difficult. Most lending institution that loan to individuals in bankruptcy or just out, will provide loans on secured loans only. Meaning it must be some type collateral in case you default on the loan. Also, keep in mind that your interest rate will be very high.
http://www.wizatbiz.com/AF/ACCOUNT_MAIN.html
From Scott, Mountain House, CA There is no mark on a credit report when a person is denied a loan or line of credit. It not only doesn't hurt your score, it doesn't even show up. If I decline a loan, I do not go back to the credit bureau and tell them that. We tell them nothing.
From David Waltzer, New York, NY Hello Jim, This is David Waltzer. I appreciate your reasoning. You are correct that a being rejected for a loan can have a negative impact on your credit score. And it is also logical on first blush to think that bankruptcy will lead to rejection. However, what the article points out is that damage bankruptcy causes to your credit score is not as bad or as lasting as one might think.
Having a poor debt to income ratio and suffering for years to repay high interest on credit card debt is often much worse for the credit score, and the life, of a debtor than having a bankruptcy on the credit report. The trend with many cases I have seen is that soon after bankruptcy discharge (within six months), debtors are given new credit cards. Working debtors are often able to rebuild credit quickly. Many of my Chapter 7 bankruptcy clients in New York and New Jersey are able go get good rates on car financing, mortgages and other loans within a few years of filing. Having a bankruptcy listed on a credit report doesn’t always equate to bad credit.
The important question is as follows: Which option will more quickly get a debtor into a position where he can get a loan at a reasonable rate? My experience is that in many cases, bankruptcy beats other options, such as consolidation or settlement, in that race.
From Dayzon, Clarksville, Tenn. Brian, you will never understand my situation because you probably have a risk-free desk job where you are told what to do and when to do it. Let's talk once you have the courage to go out and start your own business.
From Brian, Seattle WA Now there is a great investment an independent record label.. not a dying industry…right…not a million of those..right..
From Jim, Nashville, TN David Waltzer's comment "Why not apply" for a loan if the applicant has a bankruptcy on his/her record is misleading and possibly damaging to the applicant's credit score.
A loan request rejection causes a hit to the applicant's credit score. Those with credit history issues should determine from the lending institution what their minimum lending standards are and in effect, obtain "pre-approval" before the actual application is submitted.
Even inquiries into your credit history can result in a credit score downgrade, so the applicant should obtain a fresh Credit Report and show it to the lender.
Then ask the simple question…"If your own inquiry turns of the exact same information as what I just supplied, will you or won't you fund the loan.
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I will be 2 yrs past my BK, have a solid business plan, put together with expertise from accountants/lawyers etc. I am a dentist, still cannot get a loan for 95k to start shop again, even after I offered equipment as collateral (retail new value over 250k, used probably 125k)..all this stuff about getting loans after BK, I believe is THERE ARE NO LOANS AFTER BK FOR AT LEAST 4-5 YEARS.