In this economy, qualifying for a bank loan or line of credit can feel impossible—even for people with perfect credit—and much more so if you’re trying to bounce back from a recent bankruptcy. But a bit of patience (targeting smaller community banks rather than large corporate banks) and a bit of help (getting others to vouch for you) can improve your odds tremendously—even in this uncertain economic climate.
As Robert C. Seiwert, senior vice-president of the Center for Commercial Lending & Business Banking at the American Bankers Association told Businessweek, “A bankruptcy can hurt your chances of getting new credit for at least seven years. What gets damaged in a bankruptcy is the view of your character. A banker wants to know, even if you have the money to repay a debt, will you? If you get into trouble, will you work with the bank or walk away?"
As a result, the key is doing a bit of little local legwork: finding community banks who will see you for more than just your credit score. "The bulk of community banks evaluate your application by sitting down and talking with you, looking at your specific collateral and your cash flow," Seiwert told Businessweek.
So what do you do when you find a bank community or small regional bank? Rule one when approaching your friendly neighborhood loan officer: be honest. Explain what happened leading up to your bankruptcy; how you’re back on financial track; and exactly what you need to keep moving. "If you can show that you did your best to make good on your obligations after the fact, or that you intend to pay back that loan now that you're profitable again, that will go a long way to restoring that chink in your character that the bankruptcy suggests," Seiwert told Businessweek.
Rule two is to play the financial field. Talk to multiple bankers, evaluating which of the local banking bunch seemed most welcoming to you and your business—even if they initially turn you down. "Stay in the loop with those bankers. Contact them occasionally and let them know about your progress," Seiwert said. "It's absolutely critical that you keep following up" to improve your chances of getting a line of credit in the future.
Rule three, is to start off small. Gradually work your way up to a larger loan or credit line as you improve your credit score. If you pay your loan on time for a series of years, your local bank will be more inclined to offer you more.
Another rule of the financial road is to seek nontraditional partners. In addition to depending on the kindness of banking strangers, turning to your businesses’ customers or colleagues to make an introduction for you at a bank to help you get your foot in the financial door. If either is willing to co-sign on your loan, or loan money directly to you as well, all the better. And never forget that people with excellent credit make for great business partners in this process, convincing banks to accept your risk to work with them.
So, if you’re bankruptcy bound and seeking solutions for continuing your business, the bankruptcy experts at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to 1-888-234-4181, or during the off hours, you can make your own appointment right online at www.billsbills.com. Simply click on the yellow “FREE Consultation Now” button and let these experts smoke out your next best financial steps.