In many situations of bad debts, it is possible for individuals to end up with bankruptcy. In such conditions, bankruptcy can provide you with a sense of relief. You will be absolved from all kinds of debt through a court order stating that you cannot repay the debt with all of your assets combined. So, you get to start with a clean slate and embark on a completely new journey with respect to your finances.
While bankruptcy can absolve your debt, it also has an ugly side to it. It can have a highly negative impact on your credit score and thereby affect your credit profile on the whole. If you are looking to borrow credit in the future, bankruptcy can make the entire process more challenging. In this article, we will have a look at how bankruptcy affects your credit score and how you can avail of a business loan after bankruptcy.
Effect of Bankruptcy on Your Credit Score
Bankruptcy is a sign that indicates that you haven’t managed your finances in a responsible manner. This will decrease your creditworthiness on the whole and make you less reliable in the eyes of banks and lending institutions. According to the FICO scoring model, bankruptcy can cause your credit score to decrease by 130 to 240 points. This can make it challenging for you to get a business loan approved.
In addition, the record of bankruptcy will remain on your credit report for a particular period of time. However, the intensity of bankruptcy will begin to reduce with time. You can always improve your credit report by being more financially responsible.
Types of Businesses That Qualify For a Business Loan
Let us have a look at the business loan eligibility for a business loan. Here is a list of businesses that can apply for a business loan.
- Partnership firms
- Private limited companies
- Sole proprietorship firms
- Self-employed individuals and professionals
How to Get a Business Loan After Bankruptcy?
After bankruptcy, getting a business loan approved can be difficult. Here are a few tips that can help you get a business loan even after.
1.Check Your Credit Score
First, get a comprehensive idea about your credit score. If you previously had a very high credit score, then, it is possible that bankruptcy did not affect your credit score as bad as it usually might.
- Improve Your Credit Score
It is always recommended to improve your credit score as it can speed up the process of getting your business loan approved. To improve your score, you can start paying your credit card dues regularly, repay debt, etc.
- Shop For a Suitable Lender
Certain lenders may have lesser credit score requirements in comparison. Ensure to look for such lenders and share all the details about your credit score and bankruptcy.
In a Nutshell
Even after bankruptcy, there are possible ways in which you can avail of a business loan. You can apply for a business loan on Finserv MARKETS up to Rs. 75 Lakhs and experience several benefits such as instant approval, flexible repayment options, and minimal documentation. You can also check for your business loan eligibility by using the eligibility calculator.