Business Credit: Let’s Debunk Some Myths
OK, business owners, let’s have a honest conversation about how we finance our business goals. What is business credit? Raise your hand if you have no clue? Who has entered a “business credit” keyword search on their favorite search engine only to find a ton of companies taunting you with words like “you qualify” or “apply here”? We’ve all been there before. As a career researcher in my former life (for 15 years), I’ve certainly kept my eye on this concept of business credit and I’m here to tell you that most of us aren’t aware of what business credit truly is and how it can work for any type of business from start-up to industry giant.
Myth #1: There’s no difference between business credit and personal credit.
False. The biggest difference is in the numbers….an EIN and a SSN to be exact. A Social Security Number (SSN)….well we all know what this is. An Employer Identification Number (EIN), issued by the Internal Revenue Service (IRS), is exclusively linked to your company’s tax account (sales tax, withholding tax, etc.) Now that you know the biggest difference, this should help you understand how business credit and personal credit should be considered two separate options when financing your business.
In fact, when you’re applying for credit and financing for your business, you should be using your company’s EIN in lieu of your SSN. Those with the inside scoop on business credit and the Industry giants are already doing this, so why aren’t you? Of course, there will be types of business financing that you will apply for where you will absolutely have to use your SSN. However, I’m here to tell you that in most cases, you can obtain vendor accounts, trade accounts, store credit cards, cash credit cards, and even business vehicle financing using only your EIN. Don’t believe, me contact me now! Run don’t walk.
Myth #2: Using your SSN to finance your business is your only option.
False. If you are currently leveraging your personal credit scores raise your hand. Let me guess, you have good to excellent credit scores don’t you? Of course you do and congratulations to you. Here’s why I’m discussing this. Last month (April 12, 2018) Gerri Detweller discusses the national average personal credit score where she does a really good job of explaining what is a good score based on the various credit rating models out there. Based on Detweller’s discussion, fair credit is considered between 650-699; poor credit is considered between 600-649, and bad credit is considered below 600.
Which category do you suspect most business owners fall under? My point is clear, most small business owners aren’t able to leverage their personal credit scores to finance their business and so they are left with limited financial capital that generally comes from the household pot of money which leaves many business goals left unaccomplished. Raise your hand if you can relate. But then there’s the wonderful blog that your currently reading that is here to tell you that even with challenged personal credit scores, you absolutely can have access to the working capital and business credit your company needs to accomplish those business goals. And how, because of what we discussed in myth #1’s debunking. Still don’t believe me? Contact me now! Drive don’t run.
Myth #3: I’m a sole proprietor, I don’t need an EIN.
You guessed it…false! Last month, I conducted a very informal survey on alignable.com – a growing online professional networking platform. For my survey, I asked “Every tax season I meet business owners filing a Schedule C using their Social Security Number instead of an EIN. Why do you think this is the case?” This post had a couple hundred views and about twenty responses that were all over the place and I loved every bit of it! I was especially pleased to see responses from accountants and fellow bookkeepers who provided very good reasons for having an EIN as a sole proprietor. Reasons which absolutely included the need to have an EIN for the purpose of financing your business.