Business Finance Solutions

Business Venture Solutions asked:

In short, yes. A personal bankruptcy during the last seven to ten years will have an impact on your ability to obtain the 7a SBA loan or any other related business loan. This is because your personal credit is a significant factor when both the SBA and the lending bank/finance company are determining to make a guarantee and a credit decision. If you have had a bankruptcy that is still present on your credit report then this form of finance may not be appropriate for your startup business or small business. If this is the case, we encourage you to take a look at our article regarding alternatives to traditional banking financing or SBA loan financing. However, all is not lost. As we have discussed previously, there are still plenty of financing options available to you if you do not have the required credit to secure a 7a SBA loan. These alternatives include private investors, but there are still companies that are making loans to people that have had past credit issues.

When looking for a lender that specializes in bad credit loans, it is imperative that you receive all fees, charges, and interest rates that will come with a potential loan. Bad credit often translates into substantially higher interest rates, closing fees, and other costs related to securing the business loan or line of credit.

If you are already an existing business that needs capital to expand then you may want to look into hypothecating your current receivables. If your customers pay you via check then you can secure a line of credit or loan based on their credit and their timeliness in paying you. If you accept credit or debit cards via a merchant account then it may be possible for you to take out an advance based on your average monthly receivables from swiping credit cards. However, both of these financing methods are expensive and you can expect to have an applied annual interest rate that ranges from 15% to 30% (or more if you include fees) if you decide to go down this financing road.

Finally, if these are you only alternatives to traditional lending then you absolutely must speak with your accountant to determine whether or not this type of credit facility is appropriate for your business. In most cases – it is not. If your business is growing extremely quickly despite issues with your personal financial situation then you may want to solicit the assistance of a private investor to provide you with the capital you need to grow.

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