How Student Loan Debt Relief Could Impact Small Businesses

December 31, 2022Blog0 comment

Student loan debt relief could potentially have a number of effects on small businesses, both positive and negative. Here are a few potential ways that student loan debt relief could impact small businesses:

Increased consumer spending: If individuals with student loan debt receive debt relief, they may have more disposable income to spend on goods and services. This could lead to an increase in consumer spending, which could be beneficial for small businesses.
Increased employee retention: Some employees may leave their jobs to pursue higher paying opportunities or to attend school full-time. However, if student loan debt is relieved, employees may be more likely to stay in their current positions or return to work after completing their education. This could lead to increased employee retention for small businesses.
Increased access to credit: If individuals with student loan debt are able to pay off their loans or have them forgiven, they may have a better credit score and be more likely to qualify for loans or credit cards. This could make it easier for small businesses to access credit to fund their operations.
Increased competition for employees: If student loan debt relief leads to an increase in the number of qualified job candidates, small businesses may face more competition for top talent. This could lead to higher wage costs for small businesses as they try to attract and retain employees.

Overall, the impact of student loan debt relief on small businesses will depend on a variety of factors, including the specific terms of the relief program and the overall state of the economy.

Who Will Benefit from Debt Relief?

Debt relief programs are designed to help individuals or businesses that are struggling to pay off their debts. The specific groups that will benefit from debt relief will depend on the specific terms of the relief program.

For example, a debt relief program that is targeted at individuals with high levels of student loan debt is likely to benefit those individuals the most. Similarly, a debt relief program that is designed to help small businesses struggling to pay off loans during a recession may benefit those businesses the most.

In general, individuals or businesses that are facing financial hardship due to high levels of debt may benefit from debt relief programs. These programs can provide relief by reducing the total amount of debt owed, extending the repayment period, or by forgiving the debt entirely.

It is important to note that not all debt relief programs are created equal, and some may have eligibility requirements or exclusions that limit who can benefit from the program. It is always a good idea to carefully review the terms of any debt relief program before participating.

Criticisms and Challenges to the Student Loan Forgiveness Plan

There are several criticisms and challenges associated with student loan forgiveness plans. Here are a few examples:

Cost: One of the main criticisms of student loan forgiveness plans is that they can be very expensive. Forgiving large amounts of student loan debt can be a significant financial burden for the government or other organizations that are providing the relief.
Fairness: Some critics argue that student loan forgiveness plans are not fair, as they often disproportionately benefit higher income earners who are more likely to have larger student loan balances. Others argue that these plans unfairly penalize individuals who have already paid off their student loans.
Ineffectiveness: Some critics argue that student loan forgiveness plans do not effectively address the root causes of student loan debt, such as the high cost of education. Instead, these plans may simply provide temporary relief to borrowers without addressing the underlying issues.
Complexity: Student loan forgiveness plans can be complex and may have a number of eligibility requirements and exclusions. This can make it difficult for borrowers to understand and navigate the process, which can be a challenge for those who are already struggling with debt.
Limited availability: Student loan forgiveness plans are often limited in availability, with only certain types of borrowers or loans qualifying for relief. This can leave many borrowers without access to these programs.

What Can Businesses Do to Prepare?

There are a few steps that businesses can take to prepare for the potential impact of student loan debt relief:

Review your workforce: Consider the number of employees in your company who may be impacted by student loan debt relief. This can help you understand the potential impact on your business and allow you to plan accordingly.
Monitor changes in the law: Stay up to date on any changes to student loan debt relief laws or programs that may affect your business. This can help you understand the potential impact and allow you to plan accordingly.
Communicate with employees: If you have employees who may be impacted by student loan debt relief, consider communicating with them about any potential changes and how they may affect their financial situation. This can help build trust and understanding within your organization.
Review your budget: If you expect student loan debt relief to have a significant impact on your business, consider reviewing your budget to ensure that you have the resources to handle any potential changes.
Seek professional advice: If you have questions or concerns about how student loan debt relief may impact your business, consider seeking the advice of a financial professional or attorney. They can provide guidance and help you develop a plan to manage any potential changes.

Where Small Businesses Can Access Immediate Working Capital?

There are several options available to small businesses seeking immediate working capital:

Small business loans: Small businesses can apply for a loan from a bank or other financial institution to obtain immediate working capital. There are several types of small business loans available, including term loans, lines of credit, and short-term loans.
Credit cards: Small businesses can use credit cards to access immediate working capital. This can be a quick and easy option, but it is important to keep in mind that credit cards typically have higher interest rates than loans and can be more expensive in the long run.
Invoice factoring: Small businesses can sell their outstanding invoices to a factoring company in exchange for immediate working capital. The factor will advance a portion of the invoice amount upfront, and the small business will receive the remainder, minus a fee, once the invoice is paid.
Short-term business loans: Some online lenders and alternative finance companies offer short-term business loans that can provide small businesses with immediate working capital. These loans are typically easier to qualify for than traditional bank loans, but they may have higher interest rates and fees.
Crowdfunding: Small businesses can use crowdfunding platforms to raise immediate working capital from a large group of people. This can be a good option for businesses that have a strong online presence and a compelling pitch.

FAQs on Student Loan Relief & Impact On Small Businesses

How does student loan relief impact small businesses?

Student loan relief could potentially have a number of effects on small businesses, both positive and negative. For example, it could increase consumer spending, improve employee retention, and increase access to credit. However, it could also lead to increased competition for employees and higher wage cost

Can small businesses access student loan relief programs?

It is generally individuals, rather than businesses, that are eligible for student loan relief programs. However, small businesses may be able to access certain types of financing, such as SBA loans, that could be used to pay off student loans.

What can small businesses do to prepare for the potential impact of student loan relief?

Small businesses can take a number of steps to prepare for the potential impact of student loan relief, including reviewing their workforce, monitoring changes in the law, communicating with employees, reviewing their budget, and seeking professional advice.

How do small businesses qualify for student loan forgiveness?

Small businesses do not typically qualify for student loan forgiveness programs. These programs are generally available to individuals who are struggling to pay off their student loans. However, small businesses may be able to access certain types of financing, such as SBA loans, that could be used to pay off student loans.

The 5 Best Banks for Small Business Loans in 2023

December 29, 2022Blog0 comment

Best Banks for Small Business Loans

We at Nav have worked with a lot of lenders over the years, and when it comes to traditional lenders—AKA local and national banks—these consistently come to the top of the list.

Chase
Live Oak Bank
Wells Fargo
Capital One
Bank of America

Chase Bank

It shouldn’t surprise you to see Chase leading the pack. It has one of the more robust credit offerings for businesses of all sizes, including those who need working capital, equipment financing, or commercial real estate loans. If big borrowing is your goal, this SBA lender offers plenty of SBA-backed options, including SBA 504 loans, which can connect you with a million or more for that new storefront or manufacturing plant.

Not ready to go big yet? That’s OK, too. Chase’s line of credit program is a great way to access capital as needed, which you can borrow against as you need it to grow your business.

Here are your business banking options with Chase Business:

Checking
Credit cards
Lines of credit
Loans
Savings and CDs
Merchant services
Collections services

Live Oak Bank

Never heard of Live Oak Bank? You’re not alone. This SBA-preferred lender is completely online, with no physical branches to visit. What they do focus on, however, they do very well. Choose from SBA 7(a) loans or 504 loans.

You won’t find a lot of extra business lending programs here, but with SBA preferred status, Live Oak Bank can get you approved and on your way quicker than most. They also handle other government small-business lending programs, such as agricultural loans through the USDA. Don’t ignore what an online bank can do for you!

Here’s what you can get with Live Oak Bank:

SBA loans (7(a) and 504)
Agricultural loans
Commercial loans
Savings
CDs

Wells Fargo

One of the big names in business banking, Wells Fargo has been handling consumer and business financial loans for a long time. With a full range of options, including equipment financing, short and medium-term loans, working capital loans, lines of credit, and business credit cards, this bank is perfect for someone who knows they need business financing but aren’t sure where to start.

Wells Fargo also works with the SBA small business loans program! Extra perks can be found for existing customers; if you already use Wells Fargo for your personal checking account, business checking account, or savings account, it’s worth checking out.

Wells Fargo has a lot to offer businesses looking for financial services:

Checking
Savings and CDs
Commercial loans
SBA loans
Lines of credit
Commercial real estate loans
Credit cards
Healthcare practice financing
Merchant services
Payroll services

Capital One

Capital One is a familiar name when it comes to business credit cards. That’s because it offers some startup business options that allow even those with less-than-excellent credit to get access to rewards credit cards with low or no annual fees.

If you’re looking for a more traditional loan option, however, the bank can help there, too. It partners with the SBA, offering loans for various amounts in almost every industry. Other lending options, including equipment financing and lines of credit, can be just what you need to get to the next level of business. (One other solid perk of Capital One is that it does so much online! It’s ideal for someone who travels and wants a bank that will be everywhere they go.)

Here’s what you can get with Capital One:

Checking
Savings
Escrow
Credit cards
Equipment and vehicle loans
Lines of credit
SBA loans (7(a) and 504)
Real estate term loans
Business installment loans
Trade credit
Merchant services

Bank of America

Bank of America has been more aggressively financing small businesses in recent years. With SBA loans and traditional business loans, lines of credit, and credit cards, it’s been giving a variety of solutions to small businesses poised for growth.

Bank of America values its relationships with customers and is more likely to offer great rates if you have other bank account services with the company.

Here’s more of what Bank of America offers:

Checking
Savings
Secured and unsecured loans
Lines of credit
Credit cards
Vehicle loan
Commercial real estate loan
SBA loans
Franchise financing
Payroll services

Types of Business Loans That Banks Offer

Many of the top banks got on our “best of” list because of the variety of funding options they offer. It’s a benefit to business owners to be able to walk into a bank branch, sit down, and spell out their needs in person—and have confidence they will get just the right lending product.

Looking at the long list of loans, lines of credit, and financing options can be overwhelming, however. We advise getting to know a bit about all the different financing banks are likely to offer; it will make the search process much less stressful.

Term Loans

A business term loan is probably the most straightforward loan option. Term loans have a preset amount and a specific timeframe to repay the funds, with a monthly payment schedule that’s consistent throughout the term of the loan.

Within this category, in addition to long-term loans like mortgages are what banks call medium-term and short-term loans. As the names suggest, each will give you a different timeframe to repay the loan.

With shorter-term loans, you need to make sure you understand the true dollar cost of the loan, which is not well-represented by APR for loans with a term under 12 months. A good rule of thumb to remember is that the shorter the term, the higher the periodic payment will likely be, but the less accrued interest you’ll likely pay.

Business Lines of Credit

A business line of credit is traditionally a preferred financing option for many small businesses. Rather than getting a lump sum, you can access the credit line as you need it, repay what you’ve borrowed, and access it again. What’s more, you only pay interest on the part of the credit line you use.

A business line of credit may be a good way to augment occasional cash flow challenges. It has the flexibility of a credit card that you can borrow against whenever you need it. Just stay below your established credit limit, make on-time monthly payments, and watch your personal and business credit scores soar!

You’ll pay anywhere from 7 to 36% for this type of financing. Just like credit cards, it will depend on your business credit profile, personal credit score, and how big the credit line is.

SBA Loans

The SBA isn’t really a lender but works with SBA-approved lenders. Loans backed by the Small Business Administration vary in length, amount, rate, and intended purpose. The most common SBA loans include the following:

SBA 7(a) Loan. Consider this for working capital (this is the most flexible SBA loan program). This general-purpose business loan comes in amounts up to $5 million with low rates and origination fees.
SBA 504 Loan. This is a good option for purchasing real estate or buying other fixed assets, with an upper limit of $20 million. Like other SBA-guaranteed loans, you’ll need collateral and a personal guarantee for this, as well as excellent credit. If approved, your rates will be considerably low.
SBA Microloans. Not every business needs to borrow millions. That’s where these smaller microloans come in. With a loan amount cap of $50,000, these loans are for startups or those just launching that have yet to demonstrate much annual revenue. Not all banks offer these, even if they do participate in other SBA programs. For a young business that can leverage a relatively small amount of borrowed capital into a big result, these loans could be a good fit.
SBA Express Loans. Like the 7(a) program but need your money fast? You may qualify for an express loan, which gives you a quicker response. Find out if you’re approved in just days instead of months.

With the exception of the Express Loans, which are often approved within a few days, most SBA loans have a lengthy application and approval process that require financial reports, a detailed business plan, cash flow statements, tax returns, and more. They aren’t ideal for anyone needing money in a few days—or even weeks. Expect to spend up to a month or more demonstrating your ability to repay and going through the loan application process. Still, the hassle can be worth it since the interest rate you pay will likely be one of the lowest of all your loan options.

If you want to get started with an SBA loan, find a lender through the SBA LenderMatch program, or contact any of the above banks directly. Most are partners in the SBA programs!

Equipment Loans

Also known as equipment financing, these loans are self-explanatory. Get help paying for new machinery, manufacturing tools, or even commercial restaurant stoves and fridges.

The rates on these loans are going to depend on your credit profile, ranging from 8 to 30%, but offer longer repayment terms than some short-term loans. These loans are considered secure since the equipment being financed is also the collateral for the loan.

Long-Term Real Estate Loans

If you’ve got a mortgage for your home, you already know how these work. Business real estate loans are considered long-term financing because they typically include longer repayment terms to help with the higher costs of purchasing real estate. Expect to get lower rates for commercial property purchases, but prepare to need plenty of cash on hand for a down payment. Banks like to see a willingness to invest upfront in the form of a 10-20% down payment; like buying a home, the more you can provide, the better rates you are likely to receive.

If you find yourself unable to get a more traditional long-term real estate loan that many banks offer, going through the SBA’s 504 loan program may be a good option. The SBA is often willing to work with businesses that haven’t been able to get funding elsewhere but demonstrate a strong annual revenue and have a very good or excellent credit score.

Traditional Banks vs. Online Lenders

When it comes to getting cash for your business, it may seem that online lenders or other alternative lenders and their simplified loan applications and shorter approval times are too good to be true. In fact, they can be a suitable option for funding, especially if you need a decision in days—or minutes!

What’s the catch? Unlike traditional bank loans, online lenders use a different set of criteria to evaluate creditworthiness, meaning that if you don’t qualify for a loan at the local bank, an online loan could be an option for you. They are making access to capital easier and faster, but that access will likely come with higher fees and APR—although that isn’t always the case for borrowers with an excellent credit profile.

Instead of taking weeks or months to get a traditional bank loan, an online loan often takes only a day or two, making this faster access to capital worth any additional cost. Be sure you understand the repayment terms of a loan before you sign on the dotted line, no matter where you apply.

Alternatives to Bank Loans for Small Businesses

If you have bad credit or haven’t been in business long enough to qualify for the options we’ve already discussed, check out alternative business lenders that offer competitive rates with less stringent requirements. There are so many financial institutions you can qualify for financing with!

Business Credit Cards

Business credit cards work a lot like personal credit cards. The perk of business cards over personal cards, however, is that your good repayment history will help you build your business credit profile. Additionally, you can often get free cards for your employees, and their spending can help accumulate points and cash back rewards that you can later redeem for items for your business.

Expect to pay the same kind of higher rates that personal cards charge, anywhere from 10 to 28%. FYI: the better the rewards, the higher the annual fee tends to be. Shop around to get the best business credit card from your bank, and consider upgrading as your annual revenue grows.

Merchant Cash Advance

New businesses may not qualify for traditional loans, but if yours can demonstrate steady sales revenue, you may qualify for merchant cash advances. These aren’t loans but instead are an advance on future sales. You’ll repay the advance daily or weekly from your debit and credit card sales.

Secured Business Loans

If you have bad credit and don’t qualify for unsecured business loans, you may be able to take out a secured business loan. In this case, you put down collateral against the loan. Why? If you are unable to pay the loan off, the lender can take that collateral (perhaps equipment or a vehicle) to cover your debt.

What is the Easiest Bank to Get a Small Business Loan With?

There’s no easy answer to this question, as it will depend entirely on what you are looking for and your qualifications. Online lenders are usually more open to those who might not qualify at the bank, although you’ll pay more for your loan.

If you have good credit, you have far more options and will get better loan terms. If your credit could use some work, consider postponing applying for a loan and spending time rebuilding your credit by paying down debt and making on-time payments.

How to Qualify for a Small Business Loan from a Bank

Once you narrow down the list of loan products that you’re interested in, you’ll want to eliminate any you don’t qualify for. Most traditional loans require you to be in business for at least two years and have credit score requirements (SBA loans often want you to have FICO scores of 680 or higher).

You may also need to meet a certain annual revenue, so read the fine print with the lender you’re considering to make sure you meet it.

What You Need To Apply for a Small Business Loan from a Bank

Once you’ve decided which bank or alternative lender you want to apply with and know which type of loan you want, gather what you’ll need for the in-person or online application.

Traditional lenders like banks may want more detailed financial statements, tax returns, and profit and loss statements, while an online lender may just want a few details about what your annual revenues are.

You’ll need to provide details for your business bank account so funds can be deposited once you’re approved for a loan.

Small Business Loans Help You Grow

Smart small business owners do their homework on lending products and the best banks for small business loans in advance of needing the money. Follow suit, and you’re sure to find the best option for your business.

CCPA

December 28, 2022Privacy0 comment

Last Revised: December 21, 2021

YOUR RIGHTS UNDER THE CALIFORNIA CONSUMER PROTECTION ACT (“CCPA”)

Your California Privacy Rights

The CCPA provides California residents with specific rights regarding their personal information. This notice describes your CCPA rights and explains how to exercise those rights. This notice also includes information regarding the collection, use, disclosure, and sale of personal information and the rights of consumers regarding their own personal information.

Clade Point does not sell your personal information to anyone, including to third-parties as defined under the CCPA.

Information you provide to Clade Point is used for business purposes. The CCPA outlines several categories for which personal information may be used under business purposes, including: auditing, security, debugging/repair, certain short-term uses, performing services, internal research for technology development, as well as for quality and safety maintenance and verification. Clade Point uses the following categories of personal information for business purposes collected about consumers. The following have been disclosed under a business purpose within the last twelve (12) months:

Identifiers. A real name, postal address, email address, account information, online identifier, IP address, Social Security number, personal preferences and attributes via cookies, or other similar identifiers.
Information from third-party data providers. Including consumer credit information, when fulfilling information requests made by you when ordering credit-related products through the site.
Other information you provide to us. Other information we collect, such as the city of birth and mother’s maiden name, is used to verify your identity in the event you forget your login information required for our online products. This category also includes information you provide us through customer service correspondence and general feedback.

For information on how Clade Point uses your personal information, visit “HOW DO WE USE THE INFORMATION COLLECTED?” section in Clade Point’s Privacy Policy.

Right to Request and Right to Deletion

To exercise your rights under the CCPA, please submit a verifiable request to us by completing the Request Form, located here.

You may also contact us regarding your rights at privacy@cladepoint.com or by calling (855) 222-8888.

While you have the right to deletion, there are certain legal exceptions, including when the personal information is necessary to complete a transaction for which we collected it or to comply with a legal obligation. When submitting a request, please note that Clade Point may claim legal exemptions for certain requests pursuant to various CCPA exemptions.

Right to Non-Discrimination

Clade Point will not discriminate against you for exercising your rights under the CCPA. If you have exercised your rights under the CCPA, some services may not be available to you when directly related to the collection of your information, as permitted by the CCPA.

Business Line of Credit

December 28, 2022Resources0 comment

Small Business Line of Credit: How to Choose the Right Option

You may be thinking: “My business is profitable, we don’t need to borrow.” But many businesses with and without cash flow issues keep a line of credit handy for unexpected growth or expansion opportunities. A business credit line is a flexible, often low-cost way, to get short-term financing to cover working capital needs.

What is a Business Line of Credit?

A small business line of credit can help small business owners maintain consistent access to funds to smooth out the ebb and flow of changes in business expenses and revenues.

Rather than receiving a fixed amount of financing like you would with a loan, a line of credit gives you access to a certain amount of money, which you can borrow from, repay, and borrow from again.

How Does a Business Line of Credit Work?

A business line of credit is a flexible loan option for businesses. It may also be referred to as a revolving line of credit . You’re familiar with a line of credit if you use a credit card. It allows you to access funds from your credit line, pay back some or all of it, and access it again. With a line of credit, the business owner decides when, if, and how they will use that borrowed capital.

Interest is typically only charged for the amount of the credit line that is accessed, and interest rates may be fixed or variable. Variable interest rates typically change when interest rates in the economy change. Some lenders charge a draw fee every time you access the credit line.

In addition, there may be an origination fee, annual fee and/or a monthly maintenance fee if you don’t use your line of credit. For any line of credit you consider, you need to carefully read the terms offered to make sure you understand any fees that may be charged.

There will be a specified repayment period, but payments will vary depending on the amount borrowed. With some lines of credit (especially those from traditional banks), there may be a draw period during which you can access funds and make interest-only payments. After that, the business owner may enter a repayment period during which the outstanding balance must be repaid over a specific period of time.

Online lenders, on the other hand, often typically offer short-term lines of credit that fully amortize (or must be paid back) over a shorter time period, often 6-24 months.

Pros and Cons of Business Line of Credit

A line of credit can give you access to capital when you need it, but there are drawbacks to consider as well.

Pros

If you have the opportunity to, for example, expand your business, a line of credit affords you the opportunity to take advantage of it. Likewise, you can get the working capital you need to pay the bills during a slow period.

For many businesses, their financing needs aren’t adequately met with a large lump sum. Let’s say you’re renovating your commercial space. You might need $50,000 now, $7,000 in six months, and another $12,000 next year. A line of credit lets you get the cash you need when you need it rather than paying interest on money you won’t need for a while.

Cons

Just like with any financing, you’ll have to pay it back. If you don’t budget in that monthly payment, you may struggle to pay it, which puts you at risk of defaulting on the loan. If you made a personal guarantee, you’ll also risk your personal assets being seized if you can’t pay the loan.

Depending on what type of financing you qualify for, you may end up paying higher interest rates. If you run a startup that hasn’t been in business for two years or doesn’t have a strong credit profile, you may not qualify for the best terms.

Benefits of a Business Line of Credit

Here are a few examples of scenarios where your business may benefit from a business line of credit:

Your business has seasonal fluctuations—perhaps your sales take a dip in the summer or winter, for example. A line of credit will help during periods of low sales.
Your clients take weeks (or longer) to pay you for products or services you provide. You might need a line of credit to cover business expenses while you wait to get paid.
You land a new client and need extra capital to cover the cost of labor and/or supplies. A line of credit can cover expenses during production.
You have the opportunity to purchase equipment or inventory at a reduced cost. You can cover the bill with your line of credit while you wait for cash flow to catch up.

Depending on the type of loan or line of credit, your creditworthiness may be a major factor in determining eligibility. The higher your credit score, the better the terms you’ll get.

If you’re concerned you won’t get credit approval, look for loans that consider your annual revenues more than credit.

How to Get a Business Line of Credit

You can apply for a line of credit through a bank or credit union, an online lender, a business loan broker, or through an online marketplace where you’ll be able to shop among various lenders. Lenders will most likely evaluate:

Time in business: 2 years or more is ideal but some are more flexible.
Personal credit scores and/or business credit scores: Lender qualifications vary but many require personal credit scores of 600-650, and banks often want even higher scores.
Revenues: These will be verified via bank statements, financial statements, and/or tax returns.

If you do not have a business bank account, you will find it more difficult to qualify. In addition, some lenders will not lend to sole proprietors, so incorporating your business as an LLC, S Corp, or C Corp can be helpful.

When a Business Line of Credit is a Good Idea

Similar to most business financing options, the best time to get a line of credit for your business is when your business has healthy revenue and cash flow, rather than when your business is in a cash flow crunch. You’re more likely to qualify for the best terms when your business is in good financial shape and has no cash flow problems.

Remember: you’re only charged interest on the amount you borrow. If you secure a line of credit now you’re not obliged to use it, but it will be there when your business needs some extra capital.

Pro tip: While a business line of credit can be useful to most business owners, if you are looking for a lump sum of money to fund a one-time project or a long-term project, a small business loan (particularly a term loan) might be a better fit for you than a business line of credit.

Best Business Lines of Credit

You have a wealth of options available to you when it comes to a line of credit. Here are some we recommend.

Fundbox

Fundbox is a popular online lender. Your business must be based in the US and should have been in business for at least 6 months with annual revenues of at least $100,000, a personal FICO score of 600+, and a business checking account. If you qualify, you’ll make weekly payments for 12 or 24 weeks. Interest rates vary.

Get An Employer Identification Number

December 28, 2022Resources0 comment

How to Apply for an Employer Identification Number (EIN) for Free

If you’re a small business owner, or are otherwise self-employed, chances are you’ve heard of an EIN or Employer Identification Number. You may not be clear, however, on exactly what an EIN is, whether you need one, or how to go about getting a free EIN if you do.

There are four ways to apply for an Employer Identification Number (EIN) for free:

Complete the online application for an EIN, or
Fill out form SS-4 and mail it to the IRS,
Fill out form SS-4 and fax it to the IRS,
Call the IRS to request an EIN (international applicants)

An Employer Identification Number (EIN) is a nine-digit number used by the Internal Revenue Service (IRS) to identify a business. You may also hear it referred to as a Federal Employer Identification Number (FEIN) or Federal Tax ID number. Think of it as the equivalent of a Social Security number for your business. The IRS requires certain businesses to get an use an EIN for tax purposes.

When does the IRS require an EIN?

The IRS offers a simple checklist you can use to determine whether your business needs an EIN. If you answer “yes” to any of the following questions, you need to apply for an EIN.

Do you have employees?
Do you operate your business as a corporation or a partnership? (Note that an LLC may or may not fall under this category. See below.)
Do you withhold taxes on income, other than wages, paid to a non-resident alien?
Do you have a Keogh plan?

You must also get an EIN if you are involved in any of the following types of organizations:

Trusts, except certain grantor-owned revocable trusts, IRAs, Exempt Organization Business Income Tax Returns
Estates
Real estate mortgage investment conduits
Non-profit organizations
Farmers’ cooperatives
Plan administrators

Keep in mind that even if the IRS doesn’t require your business to get one, there may be times you need an EIN; for example to open a business bank account or to apply for a small business loan.

Do I need an EIN if I’m self-employed?

Maybe. The IRS considers you self-employed if you operate a business or trade as a sole proprietor or an independent contractor, if you are a member of a partnership that carries on a trade or business or if you are otherwise in business for yourself. (And yes, that can include “side hustles” or “gig work,” even if it’s part-time income.)

If you are self-employed, ask yourself the questions listed above and if you answer “yes” to any of them, you need an EIN.

Do I need an EIN for an LLC?

You may or may not need to get an EIN if your business structure is a Limited Liability Company (LLC). If you answered yes to the questions listed previously, then you will need an EIN. In addition, the IRS provides guidance on whether LLCs need an EIN. It includes the following:

“A single-member LLC that is a disregarded entity that does not have employees and does not have an excise tax liability does not need an EIN. It should use the name and Taxpayer Identification Number of the single member owner for federal tax purposes. However, if a single-member LLC, whose taxable income and loss will be reported by the single member owner needs an EIN to open a bank account, or if state tax law requires the single-member LLC to have a federal EIN, the LLC can apply for and obtain an EIN.”Source: Internal Revenue Service

Does my business need an EIN?

If you have reviewed IRS guidelines for when you need an EIN and are still unsure, it’s wise to talk with an accounting professional to determine what is required of your business.

In addition to IRS requirements, you may find your business needs an EIN to get a business bank account, to apply for financing, or to apply for a business license.

Does it cost money to get an EIN?

The good news is you can apply for an EIN for free. If you use a law firm or other professional service to incorporate your business, they may take care of this task for you and may or may not charge for that service. Just keep in mind that you applying for an EIN is a simple process for most business owners, and you can do it for free on the IRS website.

How do you apply for an EIN?

The Internal Revenue Service (IRS) requires a completed Form SS-4 to receive an EIN.

As mentioned earlier, there are four ways to get an EIN for free:

1. Complete the online application for an EIN. You can complete the application online on the IRS website at IRS.gov. If you are successful, you will get your EIN immediately. The online system will guide you through the required questions step-by-step but there are a few caveats you should understand before you start.

You must complete the online application in one session; you won’t be able to save it and return later. In addition the online session will expire after 15 minutes of inactivity, and you’ll have to start over, so plan for some uninterrupted time to complete this task. And even though it is an online application, you must complete it during the hours of 7 a.m. to 10 p.m. Eastern Standard Time, Monday to Friday.

It’s a good idea to review form SS-4 before you start the online application so you can gather the information you need to complete the online application.

ImportantIf you are assigned an EIN online, make sure you save the notice verifying that your business has been assigned an EIN and keep it in a safe place.

2. Fill out form SS-4 and mail it to the IRS. If your principal business, office or agency, or legal residence in the case of an individual, is located in one of the 50 states or the District of Columbia, mail it to Internal Revenue Service, Attn: EIN Operation, Cincinnati, OH 45999. If you have no legal residence, principal place of business, or principal office or agency in any state, mail the completed form to Internal Revenue Service Attn: EIN International Operation Cincinnati, OH 45999. The official processing timeframe for an EIN application received by mail is four weeks, though it may take longer.

3. Fill out form SS-4 and fax it to the IRS at (855) 641-6935 if your business (or residence if you are a sole proprietor) is located in one of the 50 states or the District of Columbia. If you have no legal residence, principal place of business, or principal office or agency in any state, fax the completed form to (855) 215-1627 (within the U.S.) or (304) 707-9471 (outside the U.S.). If approved and you provide a fax number for a response, you should receive your EIN by fax within four business days.

4. Call the IRS to request an EIN (international applicants only) at +1-267-941-1099. Note that it is not a toll-free number so international phone charges may apply, and you must call between 6 a.m. to 11 p.m. (Eastern Time), Monday through Friday. Also note the person making the call must be authorized to receive the EIN and answer questions concerning the application.

Who is the responsible party on the EIN application?

Each application must designate a “responsible party” who must be an individual, not a business entity. The responsible party is the person who ultimately owns or controls the entity or who exercises ultimate effective control over the entity. And importantly, all EIN applications (mail, fax, electronic) must disclose the name and Taxpayer Identification Number (SSN, TIN, ITIN, or EIN) of the true principal officer, general partner, grantor, owner or trustor. Find more details about responsible parties here.

Note that if the responsible party has requested an EIN online previously, they won’t be able to use that method to request one again and will have to file another way.

Who qualifies for an EIN?

Anyone whose business is located in the United States or a U.S. territory and has an existing valid taxpayer ID, such as a Social Security number, Individual Taxpayer Identification Number or previous EIN, can apply for a new EIN. While new businesses often apply for EINs, it’s also possible that an established business will need to get one if, for example, it hires its first employee.

How long does it take to get an Employer Identification Number?

Filling out the paperwork for your EIN can take 10 minutes or less, if you are prepared. How long it takes to get the number back, however, will depend on how you submit your information. If you submit the information online, you can get your number back immediately. Filling out the SS-4 and mailing it in can take at least 4-5 weeks.

Depending on the needs of your business, it could be in your best interest to file online. This could eliminate the wait between filing and submitting a loan application or anything else for which you need your EIN.

Will my EIN ever change?

There are times when a business may need to apply for a new EIN. Generally, though, a business name change is not one of them.

Sole proprietorships

The IRS will require you to obtain a new EIN if you:

Are subject to a bankruptcy proceeding.
Incorporate.
Take in partners and operate as a partnership.
Purchase or inherit an existing business that you operate as a sole proprietorship.

It will not require you to obtain a new EIN if you:

Change the name of your business.
Change your location and/or add other locations.
Operate multiple businesses.

Corporations

The IRS will require your corporation to obtain a new EIN if:

A corporation receives a new charter from the secretary of state.
You are a subsidiary of a corporation using the parent’s EIN or you become a subsidiary of a corporation.
You change to a partnership or a sole proprietorship.
A new corporation is created after a statutory merger.

The IRS will not require your corporation to obtain a new EIN if any of the following statements are true.

You are a division of a corporation.
The surviving corporation uses the existing EIN after a corporate merger.
A corporation declares bankruptcy.
The corporate name or location changes.
A corporation chooses to be taxed as an S corporation.
Reorganization of a corporation changes only the identity or place.
Conversion at the state level with business structure remaining unchanged.

LLCs

Your LLC will be required to obtain a new EIN if:

A new LLC with more than one owner (Multi-member LLC) is formed under state law.
A new LLC with one owner (Single Member LLC) is formed under state law and chooses to be taxed as a corporation or an S corporation.
A new LLC with one owner (Single Member LLC) is formed under state law, and has an employment or excise tax filing requirement.

Your LLC will not be required to obtain a new EIN if:

The LLC name or location changes.
You report income tax as a branch or division of a corporation or other entity, and the LLC has no employees or excise tax liability.
An existing partnership converts to an LLC classified as a partnership.
An LLC that already has an EIN chooses to be taxed as a corporation or as an S corporation.
A new LLC with one owner (single member LLC) is formed under state law, does not choose to be taxed as a corporation or S corporation, and has no employees or excise tax liability.

NOTE: You may request an EIN for banking or state tax purposes, but an EIN is not required for federal tax purposes.

For full details on when you need (or don’t need) a new EIN, visit IRS.gov.

How Do I Find My Employer Identification Number?

If you’ve already received your EIN and have misplaced it, there are a number of ways to retrieve it.

Look back at your records to see if you have the printed notice from the IRS. If you applied by mail or fax, you will have received the mailed or faxed notice, but if you applied online you will have to rely on the copy you saved online.
Call the IRS Business & Specialty Tax Line at 800-829-4933.
Contact your bank if you opened a bank account under the business name. Banks are required to obtain your EIN before opening the account, so they likely have it on hand.
Review prior tax returns where you used your EIN.

What do I do with my EIN?

Regardless of which application method you use to apply, if you are successful, you’ll receive a Form SS-4 Notice verifying that your business has been assigned an EIN. Be sure to hang onto that notice so you can use it to verify your EIN whenever necessary.

It may be requested when you apply for a variety of business services, including a business license or fictitious name (“doing business as”), or financial products such as business credit cards, small business loans or business bank accounts.

Just as you would never want to use the wrong Social Security number when applying for personal loans, you never want to use the wrong EIN when applying for business loans.

Your EIN may or may not appear on your business credit reports. Each business credit reporting agency assigns a unique number for your business credit file in its system, and for that reason, your EIN is not the main identifier for your business credit reports.

Related: What is a DUNS Number?

Finally, business identity theft is a serious problem. If you believe someone is using your business name or EIN to file tax returns or tax forms, make sure you contact the IRS immediately to file a business identity theft case.

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