An EIN may be helpful information to include in your business loan application, but it is not the only piece of information lenders may require. Lenders consider other financial data and information before they approve applicants for business loans.
An EIN, also known as an Employee Identification Number, is used to numerically identify a business entity to the IRS. Not every business entity is required to have an EIN, but most are.
Business owners must have an EIN if they own a business that:
- Has employees.
- Operates as a corporation or partnership.
- Files tax returns for: Employment, Excise, or Alchohol, Tobacco, and Firearms.
- Withholds taxes on income (other than wages) paid to someone who is a non-resident alien.
- Has a Keogh plan.
A business loan is funding designated for the start-up, growth, or maintenance of a business. For example, some entrepreneurs may take out a business loan in order to purchase start-up supplies, services, or property for their business. Experienced business owners may also utilize business loans to cover payroll costs or other expenses for the sustainability of their company.
To secure business installment loans, lenders will ask for a few pieces of information. That information may include the following:
- Social Security number.
- Government-issued photo identification.
- Bank account information.
- Proof of business ownership and residency.
- Proof of business income and equity.
How do business loans affect personal credit? When it comes to business loans, the personal finances of the borrower shouldn’t be affected as long as the loan is taken out in the name of the business, not the business owner. If you take out a personal loan for business reasons, your credit may be affected depending on how you handle the loan.
Make sure you have a solid plan for returning the funds; otherwise, you may see a dip in your personal credit. For example, say you planned to use company profits to pay for a personal loan you took out for your business. If your business doesn’t make sufficient profits to cover the Loan balance, plus interest, you will have to use your own personal funds to pay for the loan. If not, you risk defaulting, which can harm your credit reports and credit score for up to seven years.