In today’s high-tech world, it no longer has to take extensive amounts of time to start a small business. Many of the business startup steps can be handled quickly via the Internet, including the ability to incorporate online, apply for a tax ID number, and apply for a small business loan.
To begin with, it is beneficial to incorporate your small business for many reasons. The main advantage is the protection of personal assets that are offered. Under this setup, business owners property cannot be a target of lawsuits or creditors. Also, corporations are taxed at a lower rate and credit ratings are established for the corporation, not based on the individuals rating.
There are websites that offer secure application forms for incorporating your business in as little as 10 minutes. The information you will typically need in order to complete the form of the state you are incorporating in and what type of corporation you will be establishing (e.g. Basic Corporation, S-corp, or LLC).
Tax ID Number
Next, it is necessary for new business owners to apply for a Tax ID number, also known as EIN (employer identification number). This is the nine-digit number that is assigned by the Internal Revenue Service (IRS) to any type of business entity (corporation, sole proprietorship, partnership, etc.). The Tax ID number is used for tax filing, business, and banking purposes, as well as for the identification of your business by various federal agencies. Again, this is a quick process online – it can be done in about 5 minutes.
Small Business Loan
If you need funding for your small business, you will want to consider applying for a small business loan online. The process is simple and quick. For this type of loan, there is not usually extensive documentation required and reputable firms do not charge application fees. Also, you can typically find out if you qualify for an unsecured loan (no collateral) or a line of credit usually within a day or two. If you do not want to risk your personal assets and are in the market for a funding between $10,000 and $100,000, this is the avenue to take. It is however important that you have a good credit history and also be sure to apply with a trustworthy company.
All in all not only are these processes simple and quick, but they greatly reduce since the margin of error since you are filling out your applications directly online.
You’ve heard the saying, “You’ve got to spend money to make money!” This couldn’t be more true, especially in business. If you want to grow your business, you’re going to need a source of funds and access to cash flow – particularly when things are moving slowly.
Establishing Business Credit – Separate from Personal…
At one time, owners of businesses had to get business credit against the things that they owned personally and based on their personal credit score. This is a major liability because if your business doesn’t make it, you could lose your personal assets, too! Thankfully, there are now ways to obtain business credit that is not just an extension of what you owe personally.
If you set the business up as an official entity- separate from yourself, you can apply for various business funding, including loans or credit cards. When a business is just starting out, it hasn’t had the opportunity to establish its own credit rating yet and so lenders will have to use your personal credit report to determine the level of risk in lending to a business you own. What happens if your personal credit score is not-so-good?
You can take some steps to increase your chances of getting a business credit card (or some other form of business funding) by doing the following:
INCORPORATE! You’ve Heard that Mantra…
Take steps to increase your personal score. Before you go any further looking for business credit cards or other sources of funding, do you know what your score is? Is your credit score below 640? If it is, it is recommended that you attempt to increase the score first. Often, making all of your payments on time for 3 consecutive months will pull your score up 2 to 4 points. Check with a financial advisor for some ways of increasing your credit score as it will only serve to help you personally as well as in business.
Create an LLC or Corporation. This type of business structure automatically means the business is separate, and not just an extension of you. If you are operating a business under your name, and have not filed any official paperwork with the government or with lawyers and accountants- your business finances are no different than your personal finances.
Have a physical address. Believe it or not, using a PO Box can hinder your ability to get a business credit card or loan! If you operate out of your home, you might consider getting a business mailbox from Mailboxes Etc, or UPS, as both offer a physical mailing address rather than a PO Box. Having a business phone line also will increase the way the business is looked at by lenders and ensures the business is reachable.
A Co-Signor could Help You with Business Credit
If you are still unable to obtain business credit cards or financing on your first try, perhaps you know someone with a strong credit rating who would be willing to co-sign an application for you. You may not be able to have a business application for credit co-signed, but you can as an individual. Get a credit card in your name and then use it only for the business. Be sure to make the payments on time, and keep the balance manageable. Over time, you’ll build up your personal credit score, which is seen as a boost for the business validity- and eventually, you’ll be able to obtain funding and credit cards under the business name.
Getting business credit cards and financing is a necessity that all businesses will face from time to time. There is a need for cash flow in order to grow and increase the business. With some careful planning and preparation, most businesses will be approved for a business credit card even if the owner has personal credit that is slightly less-than-perfect.