Can I use an EIN to Apply for a Small Business Loan?

Getting a loan using only your Employer Identification Number (EIN) is possible, but these loans still consider your business's creditworthiness. However, there are alternative ways to secure financing that doesn't rely heavily on your personal or business credit.

Online Business Loans

Online business loans simplify the process for businesses looking to apply for EIN-based financing, especially with poor credit. These loans are more accessible because they offer solutions that look beyond your credit score; they take into account your business performance, cash flow, and growth potential. This means that even if your credit history isn’t perfect, you can still get the funding you need based on your business’s health and potential.

What makes online loans even more appealing is their convenience and speed. The application process is user-friendly and can be completed online, saving you time and effort. Plus, approval times are often quicker, making online business loans a great choice when you need fast access to funds for seizing opportunities or handling emergencies.

With flexible loan terms and access to specialized lenders, online business loans offer a practical and straightforward way to obtain EIN-based financing that suits your unique business needs.

Invoice Financing

Invoice financing lets businesses get quick cash by using unpaid invoices as collateral. Here’s how it works: a lender gives you a portion of the money you’re owed upfront, usually around 80% to 90% of the invoice total. Then, when your customer pays the invoice, you get the remaining amount, minus a small fee.

Invoice financing doesn’t rely heavily on your personal or business credit history. So, even if your credit isn’t stellar, you can still use your invoice to access funds. It’s also fast, making it great for covering expenses or seizing opportunities.

Turning unpaid invoices into usable cash reduces the need for long-term debt and helps you maintain a healthy cash flow. Invoice financing is a versatile and practical way to handle short-term cash needs. It is a dependable alternative to traditional loans, especially if you’re looking for fast and credit-friendly financing.

Purchase Order Financing

Purchase order financing is a helpful financial solution for small business owners, especially when they encounter sizeable customer orders but lack the funds to fulfill them. Here’s how it works: A specialized financing company provides the money to pay suppliers for the goods required to fulfill customer orders.

This financing often covers a substantial portion of the order cost, typically ranging from 50% to 100%. Once the products are delivered to the customer and the invoice is issued, the business repays the financing company, usually with a fee involved.

Purchase order financing allows businesses to seize growth opportunities without accumulating long-term debt. Instead of taking out loans, businesses use their existing orders as collateral to secure funding, which is particularly helpful for startups or those with limited credit histories. With purchase order financing, the focus is on the creditworthiness of your customers – not your own credit history.

This financing option is a lifeline for businesses that face occasional surges in demand. It enables them to fulfill substantial orders, keep customers satisfied, and maintain a healthy cash flow.

Merchant Cash Advances

Merchant cash advances (MCAs) are a simplified form of business financing where a company receives a lump sum of cash up front, typically used for immediate needs, in exchange for a portion of future credit card sales and a fee.

Here’s how it works: A business owner agrees to sell a part of their future credit card sales to a financing company. The financing company then provides a lump sum of cash, which the business can use immediately. The repayment happens daily or weekly, with a fixed percentage of the business’ credit card sales deducted until the advance and the fee are fully paid off.

MCAs are appealing for their accessibility and speed, making them suitable for businesses that require rapid capital injection or lack strong credit histories. However, MCAs typically have higher fees and shorter repayment periods than traditional loans. You need to carefully assess your financial situation and the terms before proceeding.

Business Credit Card

A business credit card provides a flexible source of funding. You can use it for various expenses, including inventory purchases, equipment, or working capital. Similar to loans, business credit cards offer revolving credit, allowing you to carry a balance over time. They also come with credit limits that can be beneficial for managing expenses. However, it’s important to be cautious about high interest rates on unpaid balances and to monitor spending to avoid accumulating debt.

Personal Credit Card

Individuals may sometimes consider using personal credit cards as an alternative to business loans, especially if they have strong personal credit. Personal credit cards can offer quick access to funds for business expenses.

However, keep personal and business expenses separate, as commingling finances can lead to complications during tax time. Personal credit cards may also have lower credit limits than business credit cards. This can limit the amount of funding available for your business.

Friends and Family

Turning to friends and family for financial support is another alternative to traditional business loans. This option may be especially viable for startup businesses or those with limited credit history. Friends and family can provide loans or investments to help your business grow.

But this approach involves personal relationships and financial risk, so be sure to have clear agreements in place, preferably in writing, to avoid misunderstandings or strained relationships in the future. Treat such arrangements with the same level of professionalism and seriousness as you would with traditional lenders.