What is an EIN?
An Employer Identification Number or EIN, also known as a Federal Tax Identification Number, is a unique identifier for business identities. There are various ways business owners can apply for an EIN. If you need to apply for an EIN and you're uncertain of where to begin, We have you covered! Let's dig in.
Do I need an EIN for my business?
When applying for a business loan product, whether through a more traditional lender or an alternative lending source, your business will generally need to have what is called an employer identification number or EIN. This is essentially like a Social Security number but for a business. Not all businesses need an EIN; however, if you answer "yes" to any of the following questions, then you will be required to get an EIN:
- Do you operate your company as a corporation or a partnership?
- Do you and your company have employees?
- Do you withhold taxes on income (other than wages) when paying any non-resident aliens?
- Do you file for employment, excise, alcohol, tobacco, and firearms on your tax returns?
- Do you have a tax-deferred pension plan, such as a Keogh plan?
- Are you or your company involved with one or more of the following organizations?:
- Real estate mortgage investment conduits
- Trusts (excluding some grantor-owned revocable trusts), IRAs, Organization business income tax return exemptions
- Estates
- Plan administrators
- Non-profits
- Farmers' cooperatives
If your business does not fall under one of the above, you can use your Social Security number when applying for a loan. Keep in mind that taxpayers can obtain an EIN for free by calling the Internal Revenue Service (IRS) or applying through the IRS website.
How do I obtain an EIN for my business?
As mentioned above, applying for an EIN is free. There are "services" that will apply on your behalf, and charge you a fee. With that being said, the process is simple, so it's recommended to start the process on your own, saving you time and money.
You can now apply online using this free service offered by the IRS. Once you have filled out the online EIN application and all of the validations have been completed, you will receive your EIN immediately. As stated by the IRS, you need to check with your state and confirm if you need a charter or state number.
Before you begin, make sure you have your taxpayer identification handy. This might be your Social Security number or Individual Taxpayer Identification Number as the principal officer, partner, co-owner, or grantor. The IRS will consider you, or whoever files, as the responsible party.
If you prefer not to file online, applications can also be sent via fax, mail, or telephone. Visit this link at irs.gov for more information on how to apply for an EIN other than using the online system.
Why Should I Get an EIN?
For one, having an EIN helps keep your personal information separate and thus less susceptible to identity theft. Frequently using your SSN for business can make you vulnerable to cyber-attacks. The EIN also gives you a more credible leg to stand on as a business—in other words, you are essentially creating your business as its own entity, disparate from you personally.
At First Union, we'd love to discuss your financing needs. Whether applying with an EIN or SSN, we can help determine what would work best for your business and thus benefit the company the most over the long term. A streamlined application process and funding in as little as two days are why many smaller businesses turn to us first. Call today, and let's get started!
Can I get a business loan with an EIN?
Like how agencies track your personal credit score, other credit agencies monitor businesses' scores. For example, Dun & Bradstreet is arguably the most popular credit bureau. You'll need to register with Dun & Bradstreet. Once done, you can begin building your business credit.
Businesses with suitable, long-standing credit histories can use their EIN to qualify for a loan. Do keep in mind that the EIN is not the only item necessary for you to receive funding, much like a personal loan. Lenders will also take cash flow, balances, and profits into consideration.
You’re reading part 18 of our 18-part series: 18 Business Loan Requirements.