Business Loan FAQ for Lorain, OH: What to Settle Before a Funding Request

An EIN, or employer identification number, is the IRS tax ID assigned to a business. A funding partner may ask for one on a business request, because it ties the bank statements and tax returns to the business rather than to the owner personally.

Without employees, a one-owner business may file its taxes under the owner's Social Security number. Whether a partner accepts that in place of an EIN is up to the partner. Getting an EIN from the IRS before a request keeps the business records separate and avoids a gap if a partner asks for one.

Think of the request form as an introduction rather than a credit application. A funding partner may check credit while reviewing the request, and that check can be a soft inquiry, which does not affect a personal score, or a hard inquiry, which can show on the owner's report.

Before a review starts, the owner can ask the partner which kind of check it runs and whether it reports the account to business or personal credit bureaus once it is open.

A request can ask to replace an earlier business balance with a new loan on different terms. A partner may ask for the current statement on the old debt, its payoff amount and the reason for the change. The business loans overview has a section on refinancing short-term debt at an invented tavern.

Writing the old payment, the old payoff date and the new numbers side by side shows whether the change lowers the monthly cost, the total cost or only one of them. A funding partner decides on any offer.

Interest paid on a business line of credit used for business costs may be deductible as a business expense. The draws are a separate matter: borrowed money is not earnings, and returning it is not spending, so only the cost of carrying the balance raises a tax question.

A retail shop that draws on a line for stock and pays fees to keep it open should keep the line statements with its records and ask its tax preparer how to report the interest and fees. That preparer, not a funding partner, gives the answer.

The agreement sets a line's life. One kind lets the business draw and repay for a stated period; when that period ends, the partner reviews the account and may renew the line, change its terms or close it. Another kind has no set end date and runs until either side ends it as the contract allows.

The agreement also sets whether the partner can lower the limit or freeze draws before the end date. The line of credit page covers draws, limits and how to ask for a higher one.