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Getting financing for your small business is a bit more complex than getting financing for, say, a personal item such as a house. In addition to the loan being secured by something that is more difficult to assess value for (it takes more time and effort to determine the potential value of a business than the value of a house), it is also being taken out in the name of a business entity, which is a fictional legal creation that has a number of legal protections. In order to get a business loan, you need to create a business and a business credit profile, and this article will explain that process:
The first thing that you have to do is talk with your lawyer and figure out whether you want to form your business under the name of an LLC or a C-corp. LLC’s offer flexibility and ease of setting up, but are complicated to take public or to advance further. C-corps, by contrast, are very stable and offer excellent opportunities for expansion, but are more tricky to set up and a little more costly. You will have to talk with your legal advisors and colleagues to decide which is a better fit for you. Once you have a business entity established, you can register it with the federal government and get an EIN (Employer Identification Number). The EIN acts like a Social Security Number for businesses, and is the primary identifier when it comes time to do your taxes.
The business will need a dedicated phone line and bank account, and it will help to have a few merchant trade lines active (this will help you have credit built for when it comes time to get a business loan.) You can now register your business with Dun & Bradstreet, fill out all the remaining forms, and voila! It is now time to register for your first business credit cards and begin building business credit so you can get a business loan.
