Keep Your Debt Down After Bankruptcy
Bankruptcy provides you with a financial fresh start, so make sure to take advantage of that and avoid any pitfalls that contributed to your financial troubles before bankruptcy. You may increase your chances of getting a business loan if you can show the lender that you have kept your debt to a minimum after bankruptcy. Additionally, demonstrating financial responsibility may help convince your lender to offer you a loan. Be prepared with evidence, such as statements showing that you’ve consistently paid your mortgage or rent payments and car payments on time since the bankruptcy.
Can I Get A Small Business Loan Without Collateral
When planning to start or grow a business, many owners are keen to find out how to obtain small business loans without collateral to fund their ideas. When it comes to loans, there are two major types: unsecured and secured.
The primary difference between secured and unsecured loans is that a secured loan requires an asset to act as security. In other words, its a collateral business loan that requires you to put something up in exchange for financing .
An unsecured loan is a no-collateral loan that has no such requirement. While there are some business loans available that require no collateral, they are not as easy to find nor as readily available as a standard secured loan.
While we cannot advise on which is better for you, its helpful to understand both options if youre seeking business funding.
Sba 7 Eligibility Requirements
If youre looking for support from the SBA, theyve got some requirements youll need to make sure you meet:
You must be officially registered as a for-profit business, and you must be operating legally.
As the business owner, you cant be on parole.
Your business must have fewer than 500 employees, and less than $7.5 million revenue on average each year for the past three years
Your net income must be under $5 million , and your tangible net worth must be less than $15 million.
You must show youre investing your own time and money into the business, having invested equity.
Your business must be physically based in the United States, and you must be doing business with the U.S. and its territories.
Your small business must be in an SBA-eligible industry . Learn more about Eligible and Ineligible Industries for SBA 7 Loans
Youll need to show that youve already tried and failed get funds from other financial lenders, fully exhausting non-SBA loan options.
Youll need to prove youve got a sound business purpose for the loan youre requesting, and that your intended funds usage is approved by the SBA.
Youll need to prove youre not delinquent on any existing debts to the U.S. government .
Recommended Reading: Fha Loan Limits Fort Bend County
Sba Loans Have Low Rates And Long Terms Making Them A Desirable Option For Small Business Owners Learn What Types Of Sba Loans Are Available And How To Apply For One
- SBA loans typically have lower rates and longer terms than you could otherwise qualify for with a conventional loan.
- Although it’s easier for a small business to qualify for an SBA loan than a conventional loan, the application requires that you provide extensive documentation about your finances.
- The amount of money you can borrow depends on the type of SBA loan you apply for. For instance, the SBA microloan is capped at $50,000, while the 7 is capped at $5 million.
- This article is for small business owners who want to learn more about SBA loans and how to apply for them.
As a new small business owner, it’s important to have a full grasp of all the funding options available to you. Many small business owners seek out initial loans from banks, friends and family, and other outside investors, but if you’ve exhausted all of these options, it may be time to look into SBA loans.
There are many different loan types available through the Small Business Administration , including options for small businesses that have been affected by a natural disaster or a national event like COVID-19.
Sba Export Express Loans
These loans, which come in the form of term loans or revolving lines of credit, can be used for any export development activity including fixed assets, refinancing and working capital. Designed to be more streamlined with reduced documentation requirements, the SBA provides an answer in 36 hours or less.
Also Check: Refinancing Through Usaa
How Do Traditional Secured Loans Work
Most people are familiar with the idea of a secured loan since they may already use lending of this type as consumers.
A mortgage, for example, is the best-known secured loan, with the collateral being your home. If you fail to make your mortgage payments, eventually, the lender would be able to repossess the property.
The whole point of setting up a secured loan is to reduce the lenders risk. This is why so many lenders prefer to only offer this type of loan, especially to new startups that are inherently riskier.
Sba Loans For Minorities
While there are no specific SBA loan programs for minorities, those business owners can take advantage of free mentoring and educational programs through Small Business Development Centers and SCORE. Consider the SBA loan programs detailed here and explore the 8 Business Development Program for disadvantaged businesses.
Read Also: Usaa Auto Loan Reviews
Changes To The Ppp Made By The Consolidated Appropriations Act 2021
The Consolidated Appropriations Act, 2021 provides $284 billion in new PPP loan funding through March 31, 2021, including special set-asides for companies in depressed areas and those with 10 or fewer employees.
The legislation provides first-time forgivable PPP loans of up to $10 million for qualifying companies with 500 employees or fewer and second-draw loans of up to $2 million for previous borrowers with 300 or fewer employees.
If you return all or part of your PPP loan, then you may reapply for the maximum amount applicableprovided you have not already received forgiveness. Further, if you would be eligible for a higher loan amount due to interim final rule changes, then you can work with your lender to modify the amount of your loaneven after forgiveness.
The list of forgivable expenses has been expanded and now includes:
- Personal protective equipment
- Complying with federal or state health and safety guidelines
- Software, cloud computing, and other human resources and accounting needs and
- Property damage due to public disturbances that took place in 2020 and were not covered by insurance.
Also new, expenses that you pay with PPP loan proceeds are now tax-deductible even if the loan is forgiven. This applies to both first- and second-draw loans.
You can now select a covered period between eight and 24 weeks from when you receive your loan, instead of needing to pick either eight or 24 weeks. Your covered period can extend through March 31, 2021.
Type Of Bankruptcy Filed
When you filed for bankruptcy, you likely took one of the two most common paths: Chapter 7 or Chapter 13. The form of bankruptcy you chose could impact your eligibility for a personal loan differently, on top of any restrictions imposed by the court.
- A Chapter 7 bankruptcy, also known as a liquidation bankruptcy in which most of your property is sold to repay creditors, can stay on your credit report for up to 10 years.
- A Chapter 13 bankruptcy, also known as a repayment bankruptcy is usually erased from your credit report after a maximum of seven years. Consequently, its impact on your ability to get a personal loan is shorter than Chapter 7.
Also, since new credit is generally discouraged during your Chapter 13 repayment plan, you may have to work with the courts to get permission to take out additional credit unless you apply after bankruptcy discharge.
You May Like: Has Mark Cuban Ever Filed For Bankruptcy
You May Like: Penfed Credit Score Requirement Auto Loan
Sba Loan Default Can You Discharge Sba Loans In Bankruptcy
In my years as a workout officer for the largest SBA lender in the country, borrowers filing for bankruptcy was par for the course. Whenever you combine lots of money owed with little chance of paying it back, the prospect of bankruptcy in one form or another is always lurking.
If you are facing an SBA loan default because you or your business cant afford the payments, chances are that bankruptcy has crossed your mind. Today, Id like to cover the most common questions that borrowers ask when it comes to an SBA loan default and bankruptcy.
What Assistance Is Right For My Business
JM: You can get assistance during this crisis through loans and tax credits. Tax credits are available to every small business, while loans may not be.
Loans are more difficult to get, because you must apply and qualify, but banks and the SBA are working hard to speed up the process during this crisis. You must pay back loans unless you qualify for forgiveness. The Paycheck Protection Program loans, for example, can be forgiven if you can show that your business used at least 60% of the money for paying employees.
Tax credits work as incentives for small business spending. If you dont have the money to pay employees, you cant benefit from the tax credits. For example, you must spend money to pay sick leave to employees, and the usual process is to get a tax credit on your next tax return. During this crisis, the IRS has included options for quick advances on these tax credits.
Also Check: How To Get Out Of Auto Loan
Sba Express Loan Requirements
The requirements for an SBA Express Loan are significantly less strict than they are for a traditional SBA 7 loan, though the tradeoff is higher rates. The things that are going to ultimately matter the most when qualifying for an Express loan are your cash flow as well as your prowess in managing your business. Also up for consideration are things like your credit score and how long youve been in business. In general, youll need a to qualify for an Express Loan.
As far as the documents youll need to fill out in order to qualify for your loan, youll work through a checklist of required forms, including a Borrower Information Form, a Statement of Personal History, and an Agreement of Compliance .
What Is An Sba 7 Loan
The SBA 7 loan is one of several commercial loans that are government-backed and that provide small, U.S.-based businesses with funding. Businesses can use these for real estate, working capital, or equipment.
The SBA doesnt lend this money directly to businesses. Instead, a bank or financial institution provides the loan, and the SBA backs a certain amount of it.
Recommended Reading: Does The Capital One Pre Approval Car Loan Work
Minimum Credit Score For Sba Loan
Just like there is no rule that says an SBA lender cannot offer a loan to a borrower with a discharged bankruptcy, there is also NO minimum credit score for an SBA loan.
Let me state that in a way that relates better to this post: SBA loans DO NOT have a minimum credit score for regular 7a or 504 loans.
A regular 7a loan is what I refer to as an SBA loan of more than $350,000 and the SBA does not require that you have a certain minimum credit score to obtain one of these loans. .
Keep in mind that even for loans over $350K that most SBA lenders will impose their own minimum score usually somewhere between 620 and 680. If your score is lower, then the key is to find a lender that does not have a minimum AND is willing to work with you.
Are Sba Loans Hard To Get
First, dont let the requirements of SBA loans scare you off from considering one. Think of SBA financing as you would any other conventional loan.
Its a regular loan and the entrepreneur never deals with the government, explains Coleman. The bank lends out its own money and the loan is serviced by the bank.
Second, understand that while each lender must meet SBA minimum requirements in order to collect the SBA guarantee if needed, lenders may also have their own requirements. One lender may require two years in business for some loans, while another may not.
Its very competitive, says Coleman. There are a lot of lenders out there willing to make these loans. The entrepreneur has a lot of choices of which lender to work with.
Read Also: Usaa Auto Loan Credit Requirements
Experts On Sba 7 Loans For Land And Real Estate
At SBA7a.Loans, we live and breathe the SBA 7 loan process. We match business owners like you with the best lender for your situation, even if it means that we have to look outside of the SBA 7 loan platform. We serve our customers by 1) offering a free educational portal, and 2) leveraging our lender-matching service to help you on your way to success. We have a deep love of American small businesses, and we believe it shows in our customer-first attitude.
Buying A Business With The Sba : Next Steps
Once youve decided that an SBA 7 loan is for you, youll need to contact a lender to help you get started. The paperwork, terms, and jargon involved in putting together an application package for an SBA loan can be overwhelming. You can get personalized guidance at SBA7a.Loans. Because we live and breathe the SBA 7 loan process, we know how to help you at every stage of the process. We’ll match you with the lender most likely to approve your request, even if we have to look outside the SBA platform.
Also Check: Firstloan Com Legit
Types Of Sba Funding For Startups
The SBA doesnt offer funding that is specific to just startups. Instead, new businesses can qualify for many of the SBAs standard loan programs. The best type of SBA loan programs for startups and new businesses include:
- SBA Microloans: Best used for working capital and small equipment purchases.
- SBA 7 Loans: Best for flexible funds.
- SBA Community Advantage Loans: Best for businesses in low income or otherwise under served communities.
- SBA Express Loans: Best for fast SBA funds.
- SBA CDC/504 Loans: Best for purchase of real estate, equipment, or other fixed assets.
Most of the SBA loan programs dont have a requirement for time in business. However, it is important to note that you will have to find an intermediary that works with startups.
Learn more about each type of SBA loan for new businesses and startups below.
Sba Community Advantage Loans
A startup that doesnt meet the eligibility criteria for the standard SBA 7 loan should consider applying for the SBA Community Advantage program. This program offers very similar rates and terms to the traditional 7 program with just a few minor differences.
One of the most significant differences is the amount that can be borrowed through this program. Borrowers can receive up to $250,000 with an SBA Community Advantage loan.
Guidelines for how money is spent are the same as standard SBA 7 loans. Funds from the Community Advantage program can be used to purchase another business, finance equipment, or for just about any business purpose.
While the lowered maximum loan amount is a drawback, this program can be extremely beneficial for startups. This is because Community Advantage loans are designed for under served communities, such as low-income areas. Startups are qualified to receive these loans.
Businesses that have been operating for two years or less that have been disqualified from other loans may receive a Community Advantage loan if all requirements set by the SBA have been met.
Read Also: Usaa Car Loan Refinance
Ive Always Run A Brick
JM: Many online services offer a quick website builder to get you started quickly.
You could also set up a Facebook page . Start with a few products until you get your order and delivery process going. You can use your existing email contact list or social media to encourage potential customers to view your website.
Find An Sba Lending Partner
So heres a fun fact you may not know about SBA loans: You dont submit an application to the SBA itself. Instead, youll apply to a lender that partners with the SBA.
This lender will be the one that actually funds your loanwhich means its the lender youll deal with all throughout your loan application, funding, and repayment process. In other words, youll want to choose a lender you like.
As youre choosing your SBA lender, you can ask potential lenders some questions to help you find a good fit:
- What fees do they charge on SBA loans?
- What are their minimum credit score requirements?
- What other borrower requirements do they have?
- How long does their SBA loan process usually take?
The SBA partners with a lot of lenders, so youll have quite a few options. For example, most big banks extend SBA loans. Tons of smaller banks have them too. Even your local credit union might offer SBA loans.
- Other financial statements
And you might end up needing a lot more than that.
In any case, youll want to get those documents in as soon as possible.
Once your lender has everything they need, it will submit your application to the SBA for approval. Depending on your loan type, the SBA will turnaround your application sometime between 36 hours and 10 days.
Also Check: Loan Officer License Ca