A bankruptcy filing does not automatically rule out a business loan. The type of filing, how long ago the discharge was, and your current cash flow decide which lenders will say yes. SBA loans and bank credit usually want a waiting period and a stronger credit history, while revenue-based funding looks more at recent sales and can move faster at a higher cost.
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What bankruptcy does and doesn't stop you from borrowing #
Bankruptcy resolves the debts covered by the case. It does not legally bar you from taking a new loan. Each lender sets its own rules for risk, and most of them will look at three things: the type of filing, how long ago it was resolved, and whether your business brings in enough money to cover new payments.
The filing also stays on your credit report for years. Under federal credit reporting rules, a Chapter 7 filing can appear for up to 10 years from the filing date, and a Chapter 13 filing for up to 7 years. A lender will see it. The question is whether it sees a filing that is years old with steady payments since, or one that is recent and still unfolding.
Some owners assume that filing for their personal debts means their business credit is also ruined. That is not always true. Business credit files are separate, and a lender may look at your business revenue, bank statements and payment history as much as your personal score. Your situation may be better than you think, but the only way to know is to look at the specifics with a bankruptcy attorney and a lender who asks the right questions.
How Chapter 7, Chapter 11 and Chapter 13 change your options #
Chapter 7 is a liquidation. Non-exempt assets may be sold to pay creditors, and remaining eligible debts are usually discharged. Lenders often treat a completed Chapter 7 as a clean break, but they will still want to see time pass and a stable record since then.
Chapter 11 is a reorganization. A business keeps operating under a court-approved plan. Owners who filed for their company may find that lenders want to see the plan completed or on track before extending new credit.
Chapter 13 is a repayment plan for individuals, usually running three to five years. You keep your property while you pay under the plan. Borrowing during an open Chapter 13 case often needs approval from the trustee or the court, so a new loan is not something to arrange on your own.
This is general information, not legal advice. Your attorney can tell you what your filing allows and what approvals you need before you sign anything.
SBA loans after bankruptcy: the right tool when you can wait #
SBA 7(a) loans are partly guaranteed by the federal government, which lets banks offer longer terms and lower rates than most alternatives. For a business owner with a filing in the past, they are often the right tool if you can wait.
The catch is process. SBA lenders review bankruptcy history closely and usually want the case resolved, a clear explanation of what happened, and several years of responsible credit since then. The timeline is measured in weeks or months, not days. You will also need tax returns, financial statements and a business plan.
SBA loans also typically require a personal guarantee from owners with a 20 percent or greater stake. That point matters, and it is covered in the FAQ below.
If you need money in the next few weeks, an SBA loan is probably not the right tool, no matter how good the rate looks on paper.
Banks and lines of credit: lower cost, stricter approval #
Banks give you something other lenders do not: lower cost and longer terms. A bank term loan or a business line of credit can be the cheapest money you will ever borrow, and a line of credit gives you flexibility to draw only what you need.
What banks do not offer in the same way is speed or approval based mainly on revenue. Bank underwriting leans on credit scores, time in business, collateral and tax returns. After a bankruptcy, many banks will decline you outright or ask for a larger down payment, a personal guarantee or collateral you may not have.
If your credit has recovered and your financials are clean, go to a bank first. You will likely get better terms. If the answer is no, you have learned something useful without paying anything.
Revenue-based funding: faster approval, higher cost #
Revenue-based financing and merchant cash advances look more at your recent sales than at your credit history. For many owners with a past filing, that is the difference between a yes and a no. They can also fund in days rather than weeks.
The trade-off is cost. These products are priced as a fixed fee on the amount you borrow, expressed as a factor rate, and that fee usually works out to a much higher APR than a bank loan. A short repayment window raises the APR sharply.
Revenue-based products fit best as a bridge for a specific, short-term need with a clear plan to repay. They fit poorly as a way to cover ongoing losses. If your business is losing money each month, a faster loan can make the gap larger.
Reading the cost: converting factor rates to APR #
Most revenue-based products quote a factor rate, not an interest rate. A factor rate is the total you repay divided by what you borrowed. A 1.25 factor on $20,000 means you repay $25,000, so the cost is $5,000. If that balance is repaid over 8 months, the true cost lands near 65–75% APR. That number looks small on paper, but the APR depends on how fast you repay.
Stretching the same fee over 12 months lowers the APR, while squeezing it into 6 months raises it. Never compare a factor rate to a bank's interest rate. Convert both to APR first.
Here is how the options compare on cost, speed and requirements:
| Option | Typical cost | Speed | What it needs |
|---|---|---|---|
| Bank term loan | Lowest APR of the group; set by credit and market rates | Usually several weeks | Strong credit, tax returns, financial statements, sometimes collateral |
| SBA 7(a) | Capped rates set by SBA rules, usually variable | Usually a month or more | Documented history, business plan, personal guarantee for 20%+ owners |
| Line of credit | APR on what you draw; varies with credit | Usually a few weeks | Credit review, revenue records, sometimes collateral |
| Merchant cash advance | Factor rate; as an illustration, 1.25 across 8 months comes to about 65–75% APR | Often within days | Consistent card or bank deposits, recent statements |
| Revenue-based financing | Fixed fee, shown as a factor or percentage; compute APR before signing | Often days to a couple of weeks | Steady recent revenue, bank statements, an operating history |
The example in that table is illustrative. Your actual APR depends on the amount, the term and how the repayments are scheduled. Ask for the total repayment amount, the schedule and any fees in writing, then calculate the APR yourself or ask the funder to show it.
Next steps before you apply #
Gather your last 12 months of bank statements, your last two years of tax returns, a simple profit and loss statement, a list of current debts with balances and payments, and your discharge or plan documents. Having these ready lets you compare offers quickly and avoid rushed decisions.
Write down the exact amount you need, what it will pay for, and how repayment will come from the business. If you cannot explain that in two sentences, the loan may not be ready yet.
Can I get a business loan while my bankruptcy case is still open? #
Sometimes, but usually only with permission. In Chapter 13, new borrowing commonly requires approval from the trustee or the court, and in Chapter 11 new credit may need court authorization. Lenders may also decline during an open case. Ask your bankruptcy attorney before applying, and do not sign a loan agreement until any required approval is in writing. Taking on debt without the required approval can create problems with your case, even if the lender is willing to fund you.
How long after a Chapter 7 discharge can I apply for an SBA loan? #
There is no single waiting period that applies to every lender. SBA lenders look at the whole picture: how the case was resolved, how much time has passed, whether you have paid your other debts on time since, and what the business's cash flow looks like now. Many owners find that the discharge date alone is less important than the years of clean payment history that follow. Ask an SBA-approved lender directly what it requires, and get the answer before you spend time on a full application.
Will a business loan after bankruptcy require a personal guarantee? #
Often, yes. SBA loans require a personal guarantee from every owner with 20 percent or more of the business. Many banks and revenue-based funders ask for one too, especially after a recent filing. A personal guarantee means you are personally responsible for repayment if the business cannot pay. Read exactly what the guarantee covers, whether it is limited or unlimited, and whether it can be released later. If the guarantee would put your personal assets at risk, talk to your attorney before you sign.
Is a merchant cash advance an option if my bankruptcy was recent? #
It can be, because merchant cash advances focus on your recent card sales and deposits rather than your credit history. That makes them one of the more accessible options after a filing. The cost is the real question. A factor rate can translate to a very high APR, especially on a short repayment schedule. Use a merchant cash advance only for a specific need you can repay quickly, and only after you have calculated the APR and compared it with at least one other offer.
Should I restructure existing debt before I borrow again? #
Often, yes. Adding a new loan on top of payments you already struggle to make usually makes the problem worse. Start by talking to your current funders about payment plans or adjusted terms. If you have several high-cost balances, ask whether consolidation would lower your total APR or just stretch your payments over a longer term. Restructuring first can also make a future application look stronger to lenders, because your payment history improves.
Where this fits your situation, and where it doesn't #
This path makes sense if your business is generating steady revenue, your existing debts are manageable, and you have a specific purpose and repayment plan for the money. It also makes sense if a bank or SBA lender has declined you and you understand the cost of the alternatives.
It does not fit if your business is losing money each month, if you are already behind on payments, or if your attorney has not confirmed that new borrowing is allowed under your case. In those situations, a payment plan, a consolidation conversation or a period of rebuilding will usually serve you better than new debt.
If your numbers match the first description and you have compared the APR of each option, you can start your request.
Where to from here
This guide is general information, not advice for your situation. Costs are typical ranges, not offers; the terms that apply to you are only those in an agreement you sign. If a lawsuit, judgment or lien notice has arrived, get an attorney's help. How this site is paid.