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Business loans and personal bankruptcy

On Behalf of | Dec 7, 2018 | Chapter 13 Bankruptcy |

Many aspiring or current entrepreneurs in Tennessee worry about the effects that bankruptcy may have on their ability to secure financing for their projects. However, there is more myth than fact to many of the ideas surrounding the relationship between debt restructuring and business loans.

Chapters 7 and 13 of the bankruptcy code are personal types of bankruptcy. They may not affect certain business matters at all. Other repercussions, while they often exist, may not be as extreme as most people imagine.

Even business bankruptcy may not be as disastrous as the public imagines. A NerdWallet article on the subject states that many lenders regularly provide financing to recently bankrupt businesses. The list includes nine lenders that consider loans for borrowers with less-than-perfect records. This illustrates the fact that financial institutions are often influenced at least as much by sturdy plans for viable returns on their investments as they are by the failure of past endeavors.

There is another thing that many lenders understand: People who run successful businesses often go into personal bankruptcy. This may be the result of a divorce or some other major change in lifestyle, but it is often a sacrifice that the business owner makes to prioritize the organization over his or her own finances. According to Chron, personal bankruptcies might not affect existing businesses at all.

The Chron article also suggests some tips, such as creating a solid business plan. Many lenders consider a solid, practical repayment schedule as a valid counterpoint to a bankruptcy. It may be more of a challenge to get new businesses started for a year or two after filing. However, existing, profitable operations and long-term plans should have less resistance to their execution.