subject: Tops Tips To Obtain A Business Loan After Bankruptcy Discharge [print this page] It's tough getting accepted for a loan after bankruptcy. There was a time when banks would not even accept the application for a loan for a minimum of 10 years following your debts were discharged by bankruptcy court. Today you could possibly qualify for a loan just one year after bankruptcy discharge, provided your financial situation has gotten better.
Getting a loan after bankruptcy
Banks or lenders willing to approve bankruptcy credit will charge an interest rate that is much higher than what you would have paid before bankruptcy. Other related fees are also more than the normal rate. You may also be asked to have a co-signer as extra security and also pledge a collateral. Banks will do this to cover their risk. You don't have any choice about this if the bank is your only likely source for getting funds.
Getting a merchant cash advance easier than a bank loan
Merchant cash advance (MCA), also called a business cash advance, is a revolutionary financing choice that can help businesses that are recovering from the bankruptcy blues. The acceptance criteria for MCA are more relaxed than banks, and while the credit history is verified, it is by no means the chief requirement. Providers are ready to finance businesses that have been running for at least 9-12 months, and bringing in a at least $5000 or so in monthly credit card sales.
The main plus points in taking on MCA are limited documentation, processing time of less than a week, and best of all - no collateral is needed. MCA providers forward you a lump sum to buy a percentage of your future credit card sales. The rates charged for the advance are not very different from the rates imposed by banks and relieves the business owner from the stress of making fixed monthly payments. The monthly payment is calculated as a percentage of sales. It fluctuates with monthly sales and is automatically transferred by the credit card processing company to the advance provider. This does away with the need to send monthly payment checks.
Ensure your credit report is error-free
Even if your previous credit liabilities have been discharged by bankruptcy, they may still show in your credit history. It is possible that some lenders may not have reported discharged debts to credit reporting agencies like they should. Make sure you check your credit report with Equifax, Experian and TransUnion and if inaccurate, report the errors and get them corrected. While missed or delayed payments will stay on your credit report for 7 years, bankruptcy will stay for 10 years. You must validate the report frequently to ensure it is error free at all three credit reporting agencies.
How to rebuild credit?
The first thing you can do is to get a secure credit cards, pay bills on time, and avoid a high balance as it haves a negative impact on your credit rating. Regularly pay all bills on time and your credit will get a boost over time. This would improve your odds of qualifying for bankruptcy credit.
After you have improved your credit and purged any mistakes from your credit report, you can apply for the best financing option for your business. If you don't want to wait then a merchant cash advance may be a good choice.
