Steps to Take to Get Approval for Business Credit
When it comes to applying for business credit, many amateurs and new small businesses owners are unaware of the steps that must be employed in order to ensure that you are getting the most out of your efforts. Getting approval for business credit does not have to be difficult so long as you take the correct measures, however without doing so it can be nearly impossible. By making use of the following advice, your credit-attaining process should be streamlined and easy to navigate. Let’s beginning with the basics of business credit and why someone would need this type of credit.
Why Do I Need Business Credit?
Business credit is separate from personal credit and because of this separation, applying for business credit will not be reflected on your personal credit reports. Separate accounts also make it easier for accounting, tax and liability purposes.
In addition, business credit has higher limits. It is not unheard of to obtain $30000 loans or $50000 loans as long as your business is shown to be viable. Businesses are more likely to carry higher balances because of operating costs and constant purchasing of supplies. There will be less adverse action on your account because it is assumed this use of money will be put towards generating more income.
Who Can Get Business Credit?
You can be a corporation, partner or sole proprietor of a home business and get business credit. Your business can be as simple as a single person dog walking business and you can get approval. Small business loans and credit are generally given approval as long as you can show a moderate personal income stream of money and excel in your expertise of the product or industry.
Beginner’s Guide to Business Credit Approval
Obtain Any Necessary Licenses
Obtaining a business license is usually as easy as going to your area’s city hall and sitting down with someone, explaining exactly the type of business you are looking to license and any details that you have worked out. Most businesses require no more than a DBA (Doing Business As) license, although depending upon where you live and what type of business you are working towards opening, you may have to file some additional paperwork. For a sole proprietorship, there is no need to file with the state. You can use your social security number (SSN) for your tax identification number (TIN) also known as federal tax employer identification number (EIN).
As a sole proprietor, you might need a new EIN, (source – IRS.gov) :
If any of the following statements are true,
- You are subject to a bankruptcy proceeding.
- You incorporate.
- You take in partners and operate as a partnership.
- You purchase or inherit an existing business that you operate as a sole proprietorship.
You will not be required to obtain a new EIN if any of the following statements are true.
- You change the name of your business.
- You change your location and/or add other locations.
- You operate multiple businesses.
Talking to someone at your local city hall is usually all that is necessary to iron out any kinks that may be keeping your business stalled.
Write a Solid Business Plan
The simple fact of the matter is no one is going to give you credit if you do not have a solid, understandable business plan to present. Your business plan should outline all aspects of your business’s financial situation, and should work to forecast growth over a period of time. Since your business plan is what you will be using to convince creditors to offer you a loan, it must be completely fool-proof, as well as attractive and understandable. Many people say that writing the business plan is 90% of the battle, and in a myriad of ways they are correct.
Finding the Right Creditor
Be sure the lender you choose to pitch your business to has somewhat of an affinity and/or passionate for what it is you area trying to do. By aligning yourself with a like-minded lender, your chances that they will stick with you through potential hard times will be greatly increased.
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