You're unlikely to get an SBA government-guaranteed loan if you already have too much debt, but there are ways to improve your chances
My son was in an accident and I borrowed money to pay his medical bills. Before the accident, I hoped to get an SBA loan to expand a construction business I operate part-time (I also have a full-time job). Now, I'm contemplating bankruptcy due to my debt. Will a bankruptcy filing ruin my chances for getting a small business loan in the future?
—S.H., Minneapolis
A U.S. Small Business Administration loan is actually a private loan guaranteed by the government and made to small companies and startup entrepreneurs with viable business plans who couldn't get commercial loans. The borrower must undergo a criminal background check and demonstrate creditworthiness. If you have a history of insolvency or are perceived to be a credit risk, you're unlikely to qualify for a loan of any kind.
If you have good credit aside from the loan you've taken out to help your son, you'd be better off applying for the SBA loan first and then filing for personal bankruptcy later if necessary, says Steve Berman, a business bankruptcy attorney based in Tampa. "You'll need to give the bank a financial statement and a business plan. Be careful not to make any fraudulent misrepresentations to them. They may look at your situation and ask if you intend to file for bankruptcy, and if you do, you'd have to disclose that and it would probably kill the loan," says Berman. If the loan officer does not ask you about the possibility of a future bankruptcy, don't volunteer that information, he adds.
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2 comments:
Hmm… I'll have to keep this post in mind because I want to run my own business soon. I have a good amount of money saved, but I know I'll have to take out a loan at some point. I can use all the advice I can get. Lately I've been thinking about buying a business instead of starting one from scratch. Any suggestions? Advice? Thanks.
@Mary -- Have you looked into other online resources? I've been told that BizTrader.com is a good place. It's this online global marketplace where you can buy a business, and even sell a business. You can also use it to find a lender, broker, accountant, or any other type of professional help.
Then there are also local small business groups, like the Chamber of Commerce, that can be a good resource.
Good luck!
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