CEO of National Business Capital, the leading fintech marketplace offering streamlined small business loans.
Starting a business is challenging, but returning to the business world after bankruptcy can be even more difficult. You’ve spent months having all of your income and assets scrutinized, and your credit score probably took a huge hit.
But, many entrepreneurs have gone through personal bankruptcies and built great companies after the fact. Well-known companies like Delta Airlines, General Motors
Going through bankruptcy is undoubtedly stressful, but it’s not the end of the road for your entrepreneurial spirit. Let’s look at six steps you can take to rebound after bankruptcy and come back stronger than ever.
Create a financial plan.
Whether you’re rebuilding your current business or starting a new business after bankruptcy, you need to develop a comprehensive financial plan. Start by taking inventory of where you’re currently at—what are your current assets and liabilities? Do you still have any outstanding debts, and if so, how much do you owe?
Once you know where you stand, it’ll help you come up with a plan for moving forward. From there, you can create a workable financial plan for the future.
Rebuild your credit score.
Your credit score will take a big hit when you file for bankruptcy, and it can take a long time to rebuild. A Chapter 7 bankruptcy will stay on your credit report for 10 years, while a Chapter 13 bankruptcy will fall off after seven years.
You can’t remove a bankruptcy from your credit report, but you can take steps to rebuild your credit in the meantime. One of the easiest ways to improve your credit is by paying your bills on time, as your payment history is one of the most significant factors influencing your total credit score.
You should also take the time to check your credit score and review your progress regularly. Your credit score is updated every 30 to 45 days, so you can plan to check it around once a month.
Reduce your operating costs.
When re-entering the business world, it’s a good idea to keep your expenses as low as possible. Look at your fixed and variable costs, and figure out what you can scale back on or what you can eliminate altogether.
This may mean you have to cut your salary and live on less, or you might need to reduce operations and cut back on your staff.
It’s always hard to cut back on certain expenses because it can limit some of your growth potential, but this is only a temporary setback until your company becomes profitable again.
Rebuild your savings.
One of the benefits of reducing your spending is that it’ll make it easier for you to save. Having a cash reserve will lower some of your stress as you rebuild your company because you won’t constantly be worried about running out of money.
The exact amount you save is up to you, but most financial experts recommend saving three to six months’ worth of expenses. You might want to consider setting up an automated monthly transfer to your savings account so you don’t have to remember to do it yourself.
Build strategic partnerships.
One of the biggest challenges of starting over after filing for bankruptcy is that some vendors and suppliers may be hesitant to work with you again. Rebuilding these relationships can take time and effort, but it can be done.
Start by addressing their concerns up front, and acknowledge any mistakes you made in the past. Explain what your plan is and how your business will do things differently moving forward.
As you pay your bills on time and fulfill the terms of your agreement, you’ll start to rebuild trust with your suppliers and vendors.
Continue moving forward.
Don’t let the fact that you went through bankruptcy discourage you or prevent you from fully engaging in your business. Bankruptcy is an opportunity for you to take stock of where you’re at and fix your financial missteps. If you take ownership and approach it with a positive mindset, you can build an even stronger business than before.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
Top Opportunities for SAP Partners in 2023 – Innovation Evangelism
Putting the ‘Digital Version of You’ to work
Erdogan’s Fastest Inflation Is Set for First Fall in Over a Year