Is a small business loan with EIN only even possible? Not for startups, no; it’s hard for startups to avoid personal credit checks. You will need some time in business and some business credit already built. But they absolutely do exist!
Find out more about how you can get one.
Can You Get a Business Loan With Just an EIN?
You can get a small business loan with just an EIN through what’s called business credit. Business credit is credit in the name of a business, versus its small business owner. A corporation with good business credit (PAYDEX 80 or better), in business for a year or more, has an opportunity to get a business loan with just an EIN.
Get an EIN from the IRS; it’s an identification number much like your Social Security Number. And you build business credit by buying from vendors using their credit cards and your EIN and paying them back on time.
If those credit card providers report to the business credit reporting agencies—and most of them do not—then you can start to build good business credit. At Credit Suite, it’s our mission to put together the most comprehensive and complete list of vendors which report.
We also keep up with credit card issuers and their requirements, so if they change, you know. And we help you build a Fundability™ Foundation so your business is far more likely to qualify for business credit the first time you apply.
Paying on time is the fastest way to build business credit. Use any business credit card wisely; it leads directly to a business loan with just EIN—and no need for a personal guarantee.
How To Apply For A Business Loan With An EIN
Any application for a small business loan starts long before you even see the application. Building a Fundability Foundation™ means you are setting your business up for success in getting a business credit card or financing. The Foundation can even help you get and retain customers!
This is how you set up your business, e.g. a usable business website, an address to receive mail, etc. It means getting a business bank account—you probably can’t get small business loans without one.
This is so even if you only use online banking. Any lender wants to see bank statements.
Get a DUNS number from Dun & Bradstreet and add at least three payment experiences with a business credit card reporting to D&B. This gets you a PAYDEX score.
While PAYDEX isn’t the only small business credit score, it’s the best-known one. Get a business credit card or business line of credit (from providers like Capital One or Funding Circle), use it, and pay it back on time.
A good small business credit score proves your corporation pays its debts, on a small business credit card or anything else.
A good personal credit score for business owners and a history of paying any business credit card on time is also helpful. Bad credit won’t block every loan, but it makes everything harder.
Applying means selecting a lender which knows your industry. The timing of your application matters, as it doesn’t make sense (to a lender) if you apply when your business has just suffered a major setback.
Applying for small business loans also means choosing the best loan product. It isn’t always a term loan.
NOTE: you cannot get an SBA loan with just your EIN. The Small Business Administration will always perform personal credit checks. They will also want a personal guarantee. Such a loan often has a better interest rate, so it is worthwhile.
Types of Loans That Don’t Always Require a Personal Credit Check
There are some small business loans and some providers where you can—at times—avoid personal credit checks. Some of these aren’t even loans, but you can still get financing from them, with no personal guarantee.
Type 1 – A Merchant Cash Advance
An MCA isn’t really a loan. Rather, you sell your receivables to a lender which pays you a percentage. There is often no personal credit check, so this is a kind of business financing good for business owners with bad credit.
The upside is fast cash. You can get financing from a merchant cash advance a lot faster than from a term loan. It’s a sale, so there’s nothing to pay back. But the main downside is higher fees.
Still, for business owners with poor credit, this might be their only financing option. One well-known provider is Rapid Finance.
Type 2 – Working Capital Loan or Line of Credit
A line of credit is a lot like a credit card but without plastic. You draw from an amount of funding, use it, and pay it back. And then you can draw from it again.
A provider like National Funding can offer loans for working capital. Working capital is financing to meet immediate, short-term business obligations and needs.
For many businesses, this kind of loan, along with a business credit card, is a practical way to handle day-to-day expenses. Then a lending product with a longer loan term is a practical solution for larger expenses, like buying equipment or land.
Type 3 – Invoice Financing and Factoring
For businesses with unpaid receivables which need to improve their cash flow, these can be great financing options. The only difference between the two is with invoice factoring, the financing company goes after your unpaid invoices.
With the other, you’re still the one who has to chase after your customers with unpaid invoices. Rapid Finance is a well-known provider of factoring services.
Since both are based only on how much is owed to a business and the reputation of the debtors for paying their bills on time, there is no credit approval process to worry about.
Type 4 – Collateral Loans
If your company has valuable assets you can use as collateral for financing, then your personal credit history matters less to lending companies.
Collateral can take the form of equipment, land or buildings, or even a book of business for a real estate agent. In fact, you can use your retirement savings as a kind of collateral for a decent loan amount.
If a lending institution can rely on your collateral for security, they will put less weight on your personal credit score, if any.
There are several providers, both online and brick-and-mortar, which offer collateral loans.
Takeaways
The best small business loans are always the ones you can get.
Establishing good corporate credit, having good cash flow, provable good annual revenue, and a decent amount of time in business will all weigh more to lenders than your personal credit. Until, eventually, your personal credit score stops mattering to them entirely. And then you can get a business loan with EIN only – with ease.
