What New Business Owners Need Before Applying for a Loan
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Applying for a business loan can be challenging, and money can be a bit of a barrier when it comes to starting a business. You need money to pay the government’s licensing and fees. You need money to get equipment and start developing a product. You also need money to pay your employees.
Down the road, your business income will take care of this. But in the beginning, this money can be hard to pull out of your own wallet. While there are many ways to raise this money, applying for a business loan is one of the best ways to develop your business without giving away shares of ownership.
Searching for small business loans doesn’t have to be overwhelming. It’s great to know your options and shop around until finding what can fit your needs. Consumers Advocate has analyzed the best loans available and valuable tips for small business owners. Here’s what you need to do.
Get an EIN
An EIN is an Employer Identification Number. This is a relatively simple process. You can go to the IRS website and fill out the online application. To apply, your principal business should be located in the U.S. or its territories. You will need a valid taxpayer identification number. This can be your social security number.
If you are registered as an S corp, you will need to complete Form 2553 as well. You can visit the online IRS EIN Assistant website and follow their step-by-step application process as soon as your business is officially formed.
You must form your business before getting an EIN. The IRS will ask for your business formation date and legal business name. You will need to register your business and get approval for the business’s name from your state before getting an EIN.
WHAT IS AN EIN?
An Employer Identification Number (EIN), also known as a Federal Employer Identification Number (FEIN), or Federal Tax Identification Number (FTIN), is like a Social Security number (SSN) for your business. The unique nine-digit EIN number allows the Internal Revenue Service (IRS) to identify businesses for tax reporting.
A Decent Credit Score
When someone lends you money, they aren’t doing it out of the kindness of their heart. They are taking a risk, and they expect to be compensated for it. To make sure that you aren’t going to default on your loan, they will want to see that you have a good credit score.
You should prepare your personal finances for a business loan by paying off debt. Do not take on any new debt until you have secured your new loan. If you do, this will cause your credit score to drop. If you have credit cards, make sure that you are consistently paying them off on time and keeping the balance low.
Knowledge of the Options
With an EIN and a good credit score, securing a small business loan should be a fairly simple process. However, don’t just jump at the first offer. If you take the first offer, you will likely miss out on a better deal.
Try to use your best bargaining skills to get the best option that works best for you and your business. When you do go shopping for a loan, make sure you educate yourself on what options are available to you. It’s best not to go into this process blindly.
When you do get your loan, use it wisely. This money has to be returned eventually. Don’t waste it on a more comfortable office and other luxuries. Make sure that every penny goes towards furthering your business. There will be time for luxuries later. By following these principles, you can make sure that you have the funds you need to run your business effectively.
Applying for a Business Loan
We can offer you a nontraditional loan that will help you to get your small business up and running. Apply today to see what great financing you can get!