After a bankruptcy, the best options for your business are the ones that look at your current sales or an asset, not just your history: sales-based funding such as Merchant Fund Express, our recommended funder, if your bankruptcy is closed and your business has steady deposits; equipment financing; invoice factoring; and microloans or CDFIs for small amounts. A bank or SBA loan usually comes later, once you have rebuilt your credit.
Which stage you are in matters a lot. If your case is still open, especially in a Chapter 13 plan, taking on new debt has its own rules. This guide explains the options, who each one fits and how to prepare. It is not legal advice: for your case, talk to your bankruptcy attorney.
Key takeaways
- The most realistic options look at your current sales or an asset, not only your credit report.
- According to the CFPB, a bankruptcy can stay on your credit report for up to ten years.
- In a Chapter 13 plan, the courts say you should not take on new debt without consulting the trustee.
- If your bankruptcy is closed, clean, steady deposits carry a lot of weight with sales-based funders.
- Disclose the bankruptcy up front, with dates and cause; hiding it usually ends in a decline.
- Use the first year to rebuild credit so you can reach cheaper options later.
The best options after bankruptcy, ranked
- Merchant Fund Express (recommended funder). Best for owners whose bankruptcy is closed and whose business has steady sales. It reviews your sales and deposits, not just your credit, and accepts FICO 500 and up. It offers $5,000 to $5,000,000, often decides in 2 to 4 hours and does not require collateral in most cases. Tell your story up front: dates, chapter and what has changed since.
- Equipment financing. Best if you need to buy a specific piece of equipment or a vehicle. Because the equipment backs the loan, the funder takes on less risk. Expect a larger down payment.
- Invoice factoring. Best if you sell to other businesses and get paid in 30, 60 or 90 days. The factor mainly evaluates your customer's credit.
- SBA microloan or CDFI. Best for small amounts if you can wait. The SBA says its microloans go up to $50,000 and are made by community nonprofits that also provide coaching; each sets its own criteria. CDFIs are Treasury-certified lenders that serve communities with limited access to credit.
- Share-secured loan or secured card. Best for rebuilding credit. It will not cover a big need, but every on-time payment adds up.
- Bank or SBA 7(a) later on. Best once you have several years of clean taxes and financials and rebuilt credit. The SBA notes that its lenders can use the applicant's credit score and history, along with cash flow and collateral.
Comparison table
| Option | When it makes sense | What matters most | Collateral | Speed |
|---|---|---|---|---|
| Merchant Fund Express | Bankruptcy closed, steady sales | Sales and deposits; from FICO 500 | Not required in most cases | Decision often in 2 to 4 hours |
| Equipment financing | A specific purchase | The equipment and your down payment | The equipment | Days |
| Factoring | Invoices to solid companies | Your customer's credit | The invoices | Days |
| SBA microloan / CDFI | Small amounts, no rush | Each organization's criteria | Varies by organization | Weeks |
| Share-secured loan / secured card | Rebuilding credit | Your deposit | Your savings | Days |
| Bank or SBA 7(a) | Years later, with rebuilt credit | Credit, cash flow and paperwork | Depends on the lender | Weeks or more |
How we chose: no ratings or scores, just fixed criteria: speed, time in business, minimum credit, ITIN acceptance, documents, amounts and collateral. Read the method in how we rank business funding options.
First: what stage is your bankruptcy in?
Before applying for anything, pin down where your case stands. A bankruptcy that closed three years ago is not the same as a payment plan that is still open:
- Chapter 7. This is a liquidation. According to the federal courts, a Chapter 7 discharge is available only to individuals, not to corporations or partnerships. If it was personal and you already received your discharge, your challenge is rebuilding credit.
- Chapter 13. This is a repayment plan for individuals with regular income, including the self-employed and owners of unincorporated businesses. The plan usually lasts three to five years, and the U.S. Courts say that while it runs, you should not take on new debt without consulting the trustee, because it could affect the plan.
- Chapter 11. This is a reorganization, usually used by businesses that want to keep operating. Financing during Chapter 11 has special rules and is handled by your attorney.
If your case is open, talk to your bankruptcy attorney or the trustee first. Applying for funding on your own at that stage can cause problems in the case. If you are still weighing whether to file, read should your business file for bankruptcy.
How funders read your bankruptcy
According to the CFPB, a bankruptcy can stay on your credit report for up to ten years. That does not mean ten years without options. What funders usually ask themselves is:
- How much time has passed? A bankruptcy from several years ago, followed by on-time payments, reads very differently from a recent one.
- What caused it? An illness, a divorce, the pandemic or the closing of a prior business are understandable stories if you explain them clearly.
- What has changed? A new business with steady deposits, an account without overdrafts and current debts show that the situation is different now.
- Is the current business selling? For sales-based funding, this is the central question. Your bank statements tell the story.
A common mistake is to stay quiet and hope it does not come up. It always comes up, and finding it later breeds distrust. It is better to bring a short letter with dates, chapter, cause and what you have done since.
To go deeper on the process, read our guide to business funding after bankruptcy.
How to choose based on your situation
| Your situation | Where to start |
|---|---|
| Open case (for example, a Chapter 13 plan) | Talk to your attorney or the trustee before asking for anything |
| Bankruptcy closed, business with steady sales | Sales-based funding |
| You need a specific piece of equipment | Equipment financing with a down payment |
| You sell to companies that pay late | Invoice factoring |
| You need a little and want coaching | SBA microloan or CDFI |
| No urgency | Rebuild credit and apply to a bank or the SBA later |
For example, the owner of a small cleaning company who finished a personal Chapter 7 two years ago, opened a new LLC and deposits everything into the business account has a very different story from someone who just walked out of court. She can show months of clean deposits and explain what changed, and that opens sales-based options even if her score is still low.
A useful rule: after a bankruptcy, funding should have a clear purpose that produces sales or prevents a bigger expense. Borrowing again for costs that produce nothing is the fastest way to repeat the story.
Your 12-month rebuild plan
- Review your credit reports. Confirm that debts included in the bankruptcy show a zero balance or as included. If there are errors, the CFPB says you can dispute them yourself at no cost.
- Open a separate business account and deposit all of your sales there.
- Avoid overdrafts. To a funder, a clean account is worth almost as much as a good score.
- Use a secured card or a share-secured loan and pay on time, every time.
- Keep your taxes current. File your returns even if you owe; an IRS balance without a payment plan complicates any application.
- Build business credit with suppliers that report to commercial bureaus.
After a year of this, you will have more options and cheaper ones. If your credit is still low, also look at the best funding with a 500 credit score.
How to apply with a bankruptcy on your record
- Confirm you are allowed to apply: if your case is open, check with your attorney or the trustee first.
- Prepare your bankruptcy paperwork: filing date, chapter, and discharge or closing date.
- Gather three to six months of business bank statements.
- Write a short explanation: cause, dates and what changed.
- Get the offer in writing and compare total cost and payment frequency.
If your bankruptcy is closed and your business has steady sales, you can apply with Merchant Fund Express. Applying is free and does not affect your credit. Leer en español.
Frequently asked questions
How soon after bankruptcy can I get a business loan?
There is no single waiting period; each funder has its own policy. What matters most is whether your case is closed, how much time has passed and how your finances look since then. Sales-based funders tend to focus on your current deposits; banks and the SBA usually want more time and rebuilt credit.
Can I get funding while I am in Chapter 13?
The federal courts say that during a Chapter 13 plan you should not take on new debt without consulting the trustee, because it may affect your ability to complete the plan. Talk to your bankruptcy attorney before applying for any funding.
Does a personal bankruptcy affect my LLC?
It can, indirectly. Many funders review the owner's personal credit and ask for a personal guarantee, so a personal bankruptcy matters even if the business is a separate LLC. What helps most is a business with its own accounts and clean deposits. For the legal effect in your case, ask your attorney.
Can I get a business loan after bankruptcy if my sales are strong?
It is possible, especially with funders that evaluate your sales and deposits, like Merchant Fund Express. It helps if your case is closed, you explain what happened and your business account does not show frequent overdrafts. Expect a higher cost at first and compare offers in writing.
How long does a bankruptcy stay on my credit report?
According to the CFPB, a bankruptcy can stay on your credit report for up to ten years. Its weight usually fades over time, especially if you show on-time payments and low card utilization afterward. Review your reports and dispute any errors.
Should I mention the bankruptcy if nobody asks?
Yes, bring it up from the start. It appears on your credit report, and finding it later breeds distrust. A short explanation with dates, cause and what has changed since is usually received better than silence.