In 2014, there were 910,090 bankruptcy filings across the country – or nearly 2,500 every single day. And while each of these individuals have their own unique story – and it’s not one that they’re happy to tell – there’s one thing that they all have in common: getting a conventional business loan from their bank or credit union is going to be much harder now than it was before.
Specifically, they’ll need to do the following to increase – but by no means guarantee – that their conventional bank loan application will be approved:
- Be virtually debt free, if not entirely debt free.
The fact that according to research by Credit.com 80 percent of American adults are in debt doesn’t matter. Banks and credit unions don’t have to be reasonable or realistic, and as such they opt to be neither. Folks with a bankruptcy on their record basically have to be the equivalent of Financial Boy and Girl Scouts, while the rest of the country can safely go into debt to finance everything from their home to their car.
- Prove that they’re earning a consistent income.
The challenge here is the word “consistent”, because it’s a subjective term. Does one year of income demonstrate consistency? Or two? And what about income fluctuations? Will an applicant who earns $3,000 a month for a year be looked upon more favorably than an applicant who earned $25,000 in the first 6 months of the year and then $11,000 in the latter 6 months? Regardless, it means that applicants won’t be able to apply for a conventional business loan for months, if not years, after they file for bankruptcy.
- Create and present a robust, comprehensive business plan.
Again, we’re back in subjective territory – because what’s considered robust and comprehensive in the real world, may not be considered the same by banks and credit unions. Often, they want something that first year MBA students would create in order to earn a high grade from their professor (i.e. something bloated, at least 20 pages long, and loaded with financial projections, charts, tables…and so on).
- Be prepared to fully explain the details that led up to the bankruptcy filing, and what steps have been taken since then improve their financial stability.
The problem here is that many people file for bankruptcy for reasons that are highly personal – such as after a divorce, or because of a mental illness or addiction. These are intimate, highly personal and sensitive details that most people wouldn’t share with anyone outside of their closest family members and friends. And yet Joe or Jane Bank Loan Officer – who was a total stranger 5 minutes ago – wants the full story, so they can “judge” whether the applicant is worthy of loan.
A Better Option: Mulligan Funding
At Mulligan Funding, every member of our management team has a seasoned “real world” business background. We know that decisions can backfire, trends can change, and mistakes are often made on top of mistakes. In short: we know that life happens.
That’s why we’re proud to offer access to business loans for individuals who have a bankruptcy in their history (our only requirement is that the bankruptcy be legally discharged by the time they apply). As we often say: we’re far more interested in what business owners are doing now and can do tomorrow, then what they did in the past.
Call Mulligan Funding at 855-326-3564 to discuss your financing options today!
The information shared is intended to be used for informational purposes only and you should independently research and verify.
Note: Prior to January 23, 2020, Mulligan Funding operated solely as a direct lender, originating all of its own loans and Merchant Cash Advance contracts. From that date onwards, the majority of funding offered by Mulligan Funding will be by Loans originated by FinWise Bank, a Utah-chartered Bank, pursuant to a Loan Program conducted jointly by Mulligan Funding and FinWise Bank.