Often, when you go to apply for a business loan, depending on the nature of that loan, the size of your business, and the number of years you’ve been in business, among other factors, the lender will likely take personal credit score into account. This could make it challenging to get approved for any such loan as, if you do have a less than stellar credit score, personally speaking, this might seriously impact your chances. In other words, it becomes a definite red flag for the lender when you have a low personal credit score or poor credit history. Now, there are what are known as EIN-only loans. This means that versus the lender looking at your credit, they instead will consider your business a separate entity with its credit score. They will then base their decision primarily on this business credit.
To have a business credit score and thus qualify for an EIN-only loan, you first must get an EIN or an employer identification number. This article looks at how you get such a number and how you might apply for an EIN-only loan.
What Is An Employer Identification Number?
An employer identification number or EIN is a unique identification number given to you by the IRS. You can apply for such a number online. This number will be utilized to keep tabs on your company’s taxes. Various agencies also use it to identify your business for multiple reasons. Think of it as basically a Social Security number for your company.
Fortunately, it is free to get an EIN. And this is a primary step in terms of establishing your business’s credit.
How Do They Track Your Business Credit?
A business’s credit is tracked very much like personal credit. In other words, the scoring agency will keep tabs on your payment history, the amount of debt you have, any defaults that you might have, among other factors. Once you get your EIN, you will usually register with Dun and Bradstreet. This is the primary credit scoring agency for businesses. And this is how you start building your credit.
Building Your Business Credit
Again, establishing a positive business credit history is the same way you would establish a positive personal credit history. Some things to do as you try and build up your business credit score that can help facilitate the process:
– Make sure to pay all your debts and obligations on time. Avoiding late payments is critical for establishing positive credit.
– Keep your credit card utilization low.
– Make sure that you have positive cash flow so that you are able to keep up with your payments.
Getting an EIN Only Loan
When it comes to getting a loan with just your EIN and not using your credit score, there are certain things that you need to keep in mind. The lender will be looking to ensure that you have a long and established credit history. They will also look at your financials to make sure that you understand financial management and keep a positive cash flow. Cash flow is an indicator that you will make your payments on time.
The amount of financing and the type of financing you receive could be limited, given that you are not going to be providing any personal credit history. Not to mention, interest rates and fees are sometimes higher for this reason on EIN-only loans.
Types of EIN Only Loans for Small Business
The most popular types of EIN-only loans include invoice factoring, merchant cash advances, and accounts receivable financing. While you can get other kinds of loans using just your business’s EIN, these tend to be the most popular options.
First Union Lending is Here for Small Businesses
We work with our clients in various industries and business sectors. We want to ensure that small businesses continue to grow and thrive. We offer short-term, SBA, and equipment financing, among other solutions. If you need additional working capital, we can help. Call today and let’s get started together.