Are you trying to find startup business loans using EIN number rather than your Social Security number? There are very good reasons for using your EIN versus your SSN, including avoiding giving out a personal guarantee.
It’s a way to protect your private assets, too, in the event of a lawsuit or bankruptcy.
Loan Option 1 – a Business Credit Card
We love business credit and nearly any business credit card because they are versatile and can help your business during its entire lifetime. Long after a startup business loan has been paid off in full, a business credit card can go on and on.
Just like when business owners have good personal credit scores, a good credit score for your business can help you qualify for funding with just about any business lender. And, it can help even if your FICO score is not so hot.
The best business loans out there are not necessarily loans at all. They could be business credit cards. But keep in mind that not every business credit card will report positive payment experiences to the CRAs.
You will have to build business credit intentionally, as the vast majority of business credit cards do not report. At Credit Suite, it is our mission to know which business credit cards will report. Why not contact us today to learn more about how we can help you build business credit?
And along the way, we’ll talk about Fundability™ and our new Fundability product, which can make it even easier to build your business credit score the right way—and do it faster than you might expect.
Loan Option 2 – an SBA Loan
The Small Business Administration would normally prefer to loan to established businesses. However, the truth is that a business that is considered to be in the startup phase does not have to have been created yesterday.
A startup small business can have a few years under its belt, it can have provable cash flow, business tax returns, and proven annual revenue. All of these positives, plus a small business owner with at least a 20% share with good personal credit? Then you’re probably okay.
And if your business already has a good small business credit score, then you’re really golden.
The SBA also has a great financing choice for small businesses located in areas where small business hasn’t really been thriving.
The most popular SBA financing choice is the SBA 7a loan. This workhorse of a small business loan is great for real estate but also to use for refinancing debt or purchasing equipment.
Keep in mind that to qualify for this SBA loan, you will need to provide a great deal of paperwork. Your small business plan and tax returns are only the beginning. The SBA also wants to pull your personal credit history.
And these take time to get! You’ll never confuse them with fast business loans.
Loan Option 3 – a Merchant Cash Advance
An MCA can be a good financing option for small businesses owners with bad credit. If your small business takes a great deal of credit card transactions, then you can qualify, even with a poor credit history.
But the interest rate can be exceptionally high, the loan term can be tiny (as in mere weeks—this is the very essence of shorter term lending), and there will be a draw on your business account as frequently as every single day.
If you are confident that your small business can quickly pay back an MCA, then recognize that it adds one little-known benefit—it makes it possible and palatable for you to give customers and prospects better payment terms.
Business owners can afford to wait 30, 60, or even 90 days for payment, because MCAs are startup business loans where you get cash in hand very quickly.
The main qualification is having a lot of credit card sales. This is why a bad credit history is not as much of a liability as it would normally be. For the most part, your FICO score does not truly come into play when the MCA lender is deciding whether to grant you an advance.
Loan Option 4 – a PayPal Business Loan
Did you know that PayPal offers business lending? Get financing from $5,000 to $100,000 for first time borrowers and up to $150,000 for repeat borrowers.
You can check your eligibility without a hard inquiry, so the credit check for this startup business loan will not affect your consumer credit score.
You will need to have a business account with PayPal already, and will have to have been in business for nine months or more. In addition, you will need to be bringing in annual revenue of $33,300 or more.
As a result, it counts as a startup loan, although you will need to be bringing in revenue rather quickly as you ramp up, if you try to get this form of financing before you’ve been in business for at least a year.
This business financing option is for a fixed term. It is paid out by a weekly draw on your PayPal account. You can select a term of 17 to 52 weeks, but your approval will be based on your eligibility and loan amount. You will not be able to change the frequency of the draw.
There is a fixed fee for this financing, paid out over the course of the small business loan.
Loan Option 5 – Invoice Financing
Somewhat like an MCA, but with invoices rather than unpaid credit card receipts, this form of funding essentially uses invoices as collateral. And, like an MCA, business owners with bad credit are more likely to be approved for them.
They are more likely to pass a consumer credit check because what matters a lot more to their startup loan provider is whether or not your clients will pay.
Also like MCAs, you can use this form of funding to give your customers and prospects more time to pay. This is because you essentially “sell” your invoices to a factoring company, they give you a large percentage of their face value, and you can cover business expenses.
Factoring means you can be generous with customers’ and prospects’ time to pay, because you are nearly completely covered. Once your customer pays their outstanding balance, you can then pay the factoring company.
Because this, like an MCA, is an advance rather than a loan, you will most likely find yourself paying an outrageous amount of interest and/or fees within a short time frame. Even when your customers pay up quickly, you will be hit with high rates.
In short, this is an expensive form of financing.
Loan Option 6 – a Term Loan
When we think of small business loans, we may very well think of a traditional bank loan with a fixed term. And we may also think of it as coming from a much more traditional lender, such as a bank or a credit union.
But even small business loans with fixed terms do not have to come from such traditional funding providers. Rather, there is an abundance of choices online, from places like National Funding.
Business owners can often determine eligibility, payback term, and amount in seconds. They may be able to get the money into their account within one business day or certainly less than a week.
And don’t be surprised if an alternative lender also turns out to be an SBA lender. The number of small business loans obtained online has been rising steadily in the past few years, and that number is only expected to continue to increase.
You can often have a lower personal credit score and still get this type of funding, although recognize that eligibility requirements can and do change over time. As inflation has struck, many of these funding providers have raised the minimum scores they will accept.
There are also funding providers in this space which have merged or changed their business model or gone out of business entirely, so do your homework and check places like Yelp, Trust Pilot, Google reviews, and the Better Business Bureau before signing anything.
Loan Option 7 – an Unsecured Business Loan from a Credit Union or the Like
When business lending is unsecured, it merely means that the entrepreneur does not offer up any collateral for the lender to be able to collect in the event of a default. As a result, these forms of funding often come with harder to attain requirements.
For example, a lender may require a higher credit score, or more time in business. A funding provider could demand better cash flow (proven by documentation) or more substantial yearly revenue.
Entrepreneurs who would have qualified for financing last year may find that now their credit history is not as good as it needs to be. Owners of seasonal businesses may also find they do not meet threshold requirements.
Other ways for a lender to justify providing financing without the security of collateral is to shorten how long you would have to pay the funding back. Another way is to reduce the amount of funding you can get unless you can meet higher threshold requirements.
A lender may potentially also look at the highest credit limit for your credit cards—both personal and business.
Therefore, in order to get unsecured business loans, you will most likely need to successfully pass through a gauntlet of requirements. Higher credit approval amounts in particular, and good FICO scores, should help the most.
Loan Option 8 – a Business Line of Credit
A company line of credit is a lot like a credit card, but without the plastic. And since some providers include a credit card as a means of spending the money in an LOC, the lines are blurred even more than that.
Lines of credit can be either secured with collateral, or they can be unsecured. For an unsecured LOC for your business, you may very well have to offer a personal guarantee.
The best thing about business lines of credit is that, unlike with a standard loan, you do not have to pay interest on every penny. Instead, you pay interest on only the amount of cash that you draw. This alone makes them a very desirable option for funding your business.
That can also make them harder for many people to get, and a startup may have the toughest time of all. As a result, offering a PG and/or securing a line of credit with collateral can help to ease the way to lender approval.
If you have a great credit score (or can partner with someone who has a high credit score), that will help with approvals, too.
One other thing about LOCs—some providers may place restrictions on their usage, so read the fine print, as always!
Loan Option 9 – a Short Term Loan
For this particular loan option, be ready for a consumer credit check and to give out a personal guarantee. Why? Because a lender wants to be sure you will pay them back.
Also, be ready for higher interest rates and possibly weekly draws directly from your business bank account. But shorter term loans may be easier for a startup to get.
After all, since you may not be able to meet a yearly revenue requirement (or prove any consistency in your small business’s revenue), the term is by definition short, so a lender will not have to wait around too long for you to pay.
You’re going to either pay them back, or you won’t. And if you do not, then they will either seize your collateral, or you’ll see them in court.
Startups can get business loans with an EIN, but don’t be shocked if your consumer credit is checked anyway.
Here at Credit Suite, we can help you to navigate the dizzying array of choices out there, even for a startup company.
Contact us today to learn more about your options, and how our new Fundability™ product can help you improve your odds of approval.