Even though, many people believe that it is not possible to get business funding or obtain credit after a bankruptcy there is no such law that prohibits starting a new business. This doesn’t mean that you can easily get funding after bankruptcy, but learning a few tips and tricks can help in acquiring a startup fund for your new business. Many people think that they are financially handcuffed after a bankruptcy and securing a loan looks difficult but it is still a possibility.
After the mortgage crisis many banks tightened their policies related to lending loans, making it harder for people to get startup funding for any business even without a previous bankruptcy. So how does a person with a recent bankruptcy get a loan? Simple, by following some creative tricks and finding alternates for funding.
Research the lending options
Even though banks are often reluctant to provide funds to people with bad credit, there are some alternate funding sources with specially designed financial deals for people with bankruptcy. Study the details about your lending options and research different sources before you find the right one with suitable terms that work for you. The secret in securing a loan even after bankruptcy is persistence. Even after getting rejected from the first places you try, you still need to find and contact more institutions to apply for credit.
Assess Your Options
The options mostly depend on the credit history. With bad credit history, the options are always limited. These options may include a restricted credit card or an unsecured personal loan, but in both cases, the interest rates are usually high. This is the reason why you need to spend some time in assessing your option and terms on which loan you are getting.
Keep Distance between your business and your name
You may start your business with the name of your wife or your eldest child. Some business’ entitle limit liability companies and corporation, but are not attached with the name of owners in legal documents.
Another option is to obtain a new employer identification or tax ID number. This may put you in a situation with no credit history but it is still better than having a bad credit history. In this case, you need to prepare an extensive and detailed business plan that can lure lenders into funding your business. Remember, in case of business loan, your lender is more interested in your ability to earn profits so prove it in your business plan!!
Find a Partner
Even if you have a bad credit history, you can find a partner with an excellent credit that can increase your chances of securing a loan on good terms. Find someone in your family or close friends who can also become a silent partner, if not interested in taking an active part in your business. Family and friends can always help!!
Some other options include reaching out to small community banks and local communities that provide grants to local businesses.
Finding Other Alternates
If you are finding banks or other lending options as a difficult choice, search for other alternates. These alternates include your personal ties with investors that can provide fund for your business, start a business that requires less capital or work as a subcontractor to reduce operational and startup costs.