Bankruptcy and Small Business Loans

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Bankruptcy and Small Business Loans
Posted by: Ron Jun 23 2004, 08:27 PM
I have been in the insurance business for 25 years. I started my own agency almost 2 years ago. I used my savings to get started. My business has doubled in the last year, However, with my savings depleted, I am in desperate need of just a little capital (under $20,000). I have about $50,000 in home equity, but I filed for bankruptcy 6 years and 8 months ago. The banks I have gone to for loans have told me that I must wait until the bankruptcy is off my credit record before they can issue me a loan. But that won’t happen for at least 4 months.
Are there any alternatives for someone in my situation?
Posted by: loanuniverse Jun 24 2004, 08:31 AM

Are there any alternatives for someone in my situation?

The truth is that I really don’t know. There are to many “it depends”. Personal credit is important when it comes to small business loans since the bank is usually taking a risk on you more than it is taking a risk in your business.

In my banking history, I have worked with lenders that took different positions towards giving business loans to small business owners with a bankruptcy in their past. I have known some that would refuse to even consider it, while others have let it slide as long as the small business owner has rebuilt its credit.

Not long ago, we were looking at a loan where the owner was 6 years removed from a bankruptcy filing, and the lending officer was successful in his argument with the credit people that the borrower had rebuilt his credit when he showed us a credit report with a dozen “paid as agreed accounts”, and a beacon/fico score of 735. Having said that, do you know what your credit report looks like now?

Getting more specific to your situation

I would really like to know what do you need the money for. Is it to give you working capital to finance the commissions from the sale of insurance? I would imagine that there is a certain lag between the time it takes from a policy being sold to the time the agent gets the commission. With business doubling, is that the problem?

I would also like to know if you were approaching these banks from the point of view of a business loan or a home equity loan.

Here are some ideas off the top of my head, some or all might make no sense since the information I have is limited, but see what you can use and build up on it.

– You need to find out exactly what your credit report shows. Most banks that I have worked for have used Equifax so I would spend the $10 that they charge and get myself one. Next best thing would be to get a TransUnion report. I would not worry too much about Experian.

– If you have approached the banks looking for a business loan, see if they bite with a home equity loan. Frankly, you need the money and repayment is going to come out of the same pockets.

– Do you have access to credit cards?

– Just exactly where are your receivables coming from? If you need to finance receivables, factoring might be a choice. It is not cheap “actually downright expensive”, but it could be a short-term solution until you can move to a more traditional facility.

– Family or friends.

Good luck.

Posted by: Guest Jul 1 2004, 11:17 PMRon;
A bankruptcy over 2 years is “ancient history” for most mortgage lenders/brokers. It will not count against you UNLESS your payment history since the BK has been spotty or bad, especially your last 12 months mortgage payment history…very important!

While it might still not be impossible if that’s the case, it would definitely be harder and at a much higher interest rate.

I can go up to 95% cash-out on an owner/occupied home, but ALOT depends on your current “middle” FICO score.

If you are in california or some 40 other states (don’t want to list them all here) I can maybe help you out. Email me at XXX@XXX.XXX.


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Author: Commercial Loan Underwriter