How to get an EIN as a small-business owner

Your Business Credit columnist Elaine Pofeldt
Elaine Pofeldt is a journalist whose articles on entrepreneurship and careers have appeared in Fortune, Working Mother, Money and many other publications. She is a former senior editor at Fortune Small Business magazine and an entrepreneur herself, as co-founder of 200kfreelancer.com, a website for independent professionals. She writes "Your Business Credit," a weekly column about small business and credit, for CreditCards.com.

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Question Dear Your Business Credit,
I am a U.S. citizen and a newbie to online business, in a startup. I want to know how to acquire an EIN without my Social Security number to obtain business credit. As my personal credit is in need of some repair, I have several charge-offs and two defaults – one credit card for $300 plus interest and principal, as well as a store card about the same in detail.

Do I need to clear personal debt in order to get business credit? Can I become an S corporation or a sole proprietorship if I am the only owner?

Should I spend money getting help from credit counseling experts? – Charlotte

Answer Dear Charlotte,
Obtaining business credit without giving a Social Security number seems to be the holy grail for many of our entrepreneurial readers, but I would not recommend that you put any time into doing this.

There are some cases in which a small-business owner with a substantial-sized small business may be able to obtain a loan based on the credit of the business. However, generally speaking, owners have to personally guarantee small-business loans and credit cards. At some point in the application process, that almost always means giving your Social Security number.

Ways to get an employer identification number

It isn’t possible to obtain an Employer Identification Number (EIN) without a Social Security number, unless you have an individual taxpayer identification number (ITIN) or an existing EIN. An ITIN is a tax processing number issued by the IRS, regardless of someone’s immigration status. It is often used by resident and nonresident aliens who have U.S. filing or reporting requirements.

You can become an S corporation or sole proprietorship if you are the only business owner, but having run both a sole proprietorship and an S corp, I don’t think choosing one entity over the other will affect your access to credit.

Alternative ways to fund your business 

If at all possible, I’d suggest looking for the money you need another way, perhaps through a part-time job or selling something you don’t need, and work on repairing your personal credit for the next six months to a year.

For small-business owners, access to credit usually depends on their personal credit. Lenders will generally make you personally guarantee bank loans and credit cards – meaning you must pay them back even if the business closes.

You do have a challenge in front of you because of the charge-offs and defaults, but I would look at this as a fresh beginning. Work on your personal credit for the next six months by paying more than the minimum balance due on any existing cards.

If you build up a great track record of repaying any existing debts on time, your credit will improve. If you really need access to a credit card, try getting a secured card, which will give you a new opportunity to show you can manage a credit card well.

When it comes to positioning yourself to borrow, it helps to put yourself in the shoes of lenders. They want to be paid back and need to see evidence that you are a good lending risk.

In this situation, I wouldn’t spend the money on hiring a credit counselor since you can do much of the work yourself on repairing your credit. 

Once you are able to build stronger credit, you’ll find that you suddenly have credit options that you never had before. That will help you do what entrepreneurs do best: build your business.

Good luck!

See related: 7 things to know about business credit cards, Used wisely, small-business cards can keeps businesses afloat, Business credit card reviews

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Updated: 12-10-2018