Thompson Law Group, P.C.

Bankruptcy does not preclude small business from new loans

Because bankruptcy is a federal remedy and is guided by the U.S. Bankruptcy Code, the general procedures and basic legal principles for a small business bankruptcy will be largely the same in Pennsylvania as in other states. Many businesses close after a bankruptcy, but some choose to continue to operate under the terms worked out during the bankruptcy proceedings. Whether one filed a personal bankruptcy in connection with a failed business, or whether the business is still operating, both the individual and the small business will find it possible to obtain financing for starting a new business or continuing the one that is operating.

Generally, such financing will be more difficult to obtain, at least for a period of time until reliability is re-established. However, in some cases the elimination of highly obstructive debt in the bankruptcy can clear the way for a small business to become attractive again to some investment banks and other lenders within a fairly short period after the bankruptcy. It's true that the credit bureaus can report bankruptcies for seven to 10 years.

However, in most cases new loans will be obtainable prior to the expiration of the reporting period. The situation in that respect has loosened up in recent months and years due to the emergence of online lenders, mostly located in Silicon Valley. These lenders do not pay strict adherence to rules about not lending to businesses or individuals with a bankruptcy history.

Current facts and figures, along with the general assessment of the applicant's reliability, are more important to the online lenders than a prior bankruptcy in making their decisions. Some of these companies are SmartBiz (an SBA lender), Blue Vine, and Lighter Capital. A Google search will likely reveal several more responsible lenders in this category. Obviously, the location  of a business in Pennsylvania or any other state is largely irrelevant with online communications that transcend physical boundaries. The important facts will revolve around all of the characteristics of the business and its leaders that merit serious consideration for investment support.

Source:, "Online Small-Business Loans Option Even With Bankruptcy", Teddy Nykiel, Sept. 22, 2015

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