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Will a Bankruptcy Doom Your Loan Hopes?

Adam Groff

March 11, 2015

Bankruptcy can happen to anyone, but that doesn't mean you can't apply for a small business loan.

There are a number ways to turn the bankruptcy tides and get back into good financial standing in the eyes of loan providers.

With financial triumphs in mind, here are a handful of ways you and your credit can recover from a bankruptcy:

Be Patient

First of all, whether you're trying to apply for a new business loan or a car loan, you may have to wait. Depending on the type of bankruptcy you experience, it might take one to three years before lenders consider you a safe investment again.

A past bankruptcy makes you a liability to many business loan providers.

However, as long as you take the proper steps to recover after your financial misstep, your credit will improve and you will once again be a viable candidate for a loan.

Open New Banking Accounts

Starting from scratch is the best way to recover from a bankruptcy, so it's important to open new checking and savings accounts. Just make sure you choose a bank that has reasonable fees and deposit requirements.

Likewise, compare interest rates and make sure you find a banking institution that gives you the most for your dollar.

Use a Secure Credit Card

As the following article shows, because bankruptcy and your credit go hand-in-hand, it's important to safely rebuild your credit score as soon as possible. This is where a secure credit card comes into play.

A secure credit card works much like a debit card - you must have the money in your bank account before you make any purchases using the card.

Unlike a debit card, your secure credit card activity is reported directly to the three major credit bureaus. With the overspending failsafe built-in, a secure credit card is a great way to build your credit and recover from bankruptcy.

Keep Track of Your Credit Report

You should order a copy of your credit report at least once a year.

The three major credit bureaus, Equifax, Experian, and TransUnion, evaluate your score based on a number of financial factors.

By reviewing your credit report each year, you can gain a better understanding of your financial health and where you can improve.

If you receive your credit report and find an inconsistency, it's important to dispute the error. Credit bureaus sometimes make mistakes that can end up setting you back during the credit rebuilding process.

Avoid Late Payments

One of the biggest reasons people fall into bankruptcy is by not paying their bills on time.

If you want to rebuild your credit faster and become eligible for a small business loan sooner, then it's imperative that you avoid late payments.

This includes mortgage, credit card, utilities, and even cell phone payments. A great way to stay ahead of the payment curve is to set payment reminders for each of your individual due dates.

Likewise, signing up for online bill pay will expedite your payments and you'll no longer have to worry about your payment getting lost in the mail.

When you're ready to get your small business finances back on track, keep in mind the bankruptcy pointers above.

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