Owning a business is the dream of many entrepreneurs around California. And even after filing Chapter 7 bankruptcy to relieve past debts, many business owners do not abandon that dream.
Starting a new business after bankruptcy can have its challenges, but it is possible. Here are a few tips for business owners looking to create a new start-up.
Take time to rebuild credit
Bankruptcy could have a significant impact on a business owner's credit score, especially if they were partially liable for the business debts. However, the record of bankruptcy only stays on someone's credit report for 10 years.
And business owners can take that time to rebuild their credit by:
- Making payments on time
- Creating and maintaining a budget
Even though someone's credit score often reflects their personal finances, many lenders and banks consider a business owner's credit score before providing them with a loan.
Analyze the market strategies closely
Most people in the business world know the importance of researching market trends. It is essential so that they can create strategies that correspond to those trends.
And it is especially critical for business owners after they have filed bankruptcy.
It may not be possible to predict a business' future, but accurate and extensive research can help business owners plan for any obstacles.
Develop a detailed business plan
After researching the current market trends, it is helpful to write up a comprehensive business plan. Business plans do not have specific requirements. However, after bankruptcy, it might be beneficial to emphasize:
- The organization: Certain business formations can help business owners separate their finances and control their business expenses.
- The request for funding: Seeking smaller investors—or even asking family and friends—to invest or provide some funds for the start-up may be helpful. There is still an obligation to repay these loans, but there is often more leeway.
- The financial projection: Planning ahead about a start-up's future finances is critical after filing bankruptcy. This is another element that can help business owners prepare for their future ventures while protecting their financial security.
There is no rule that prevents business owners from starting a new company after filing bankruptcy. However, it is essential for business owners to reevaluate their business strategies and take extra precautions to protect themselves before moving forward.