What is a good credit score to get a business loan?

What is a good credit score to get a business loan?

Although every lending institution has its own business loan requirements, which also depend on the type and amount of loan you are seeking, many will require a minimum credit score to consider the eligibility and trustworthiness of a borrower.

Each loan application is evaluated on its own basis, and each borrower is approved or denied depending on a combination of factors. Those include the number of years in business, the size of the enterprise, vendor relationships, annual revenue, steady profitability, and other criteria.

Business and Personal Credit Scores

The business credit score is separate from your personal credit score, and a potential lender will look at both, but the business one tracks the financial history and reliability specifically of your business. Most small businesses do not have a separate business credit score, and many lenders may not require one unless you are applying for an SBA loan or a longer-term bank loan.

Personal credit scores usually range between 300 and 850. To qualify for most small short-term business loans, you likely need a credit score of at least 550 but preferably in the 700s. The lower your credit score, the higher the interest rate will be.

Building Your Credit Score

You can improve your credit score by paying down existing balances and always getting your payments in on time every time. Newer businesses can start with a business credit card or a business line of credit, both of which are easier to secure than a loan.

0% Intro APR Business Credit Card

You can roll over the payments from month to month for a specified amount of time with no added interest. After the interest-free months, a variable APR is set at a rate that depends on your creditworthiness.

Business Line of Credit

A business line of credit gives flexible financing on a regular basis, and you only pay on the amount you use. If you repay on time, you can return to your line of credit as often as necessary.

Who will be accepted for a loan?

Only the borrowers that lenders deem the most reliable will be accepted because lenders want to loan money only to those who are capable of repaying on time and are dependable with their financial obligations. With a credit score being a measure of a business owner’s debt history, it is a good way to show that you are a worthwhile and trustworthy candidate.

Posted in 4506-Transcripts, Financial, Small Business Loans | Tagged , , , , | Leave a comment

Are credit unions good for a small business?

Are credit unions good for small business?

Using a credit union for your small business can be a big decision with far-reaching effects. There are lots of factors to consider with this decision, but the first thing you need to ensure is you understand exactly what a credit union is.

The entire concept of a credit union is to serve a community and give them the best service possible to aid and grow that community. This means a lot of differences from other financial institutions, but the most significant one of these is that credit unions are non-profit. This means, unlike traditional banks, credit unions are not concerned with making the most money possible or increasing revenue streams. It will instead mean ensuring the services provided are the best serving and most valuable ones possible.

This will mean that if you work with a credit union, you will be getting very high interest rates, because they are going to offer you terms that will earn you the most money and benefit you the most, as they are not concerned with making money from you. As well as the interest rates being high, the other significant financial benefit is the loan rates being low, so you will not feel under the same level of pressure to pay your loan down as quickly as possible.

Credit unions contrast most with banks and other finance companies with their size. Being smaller and more community-driven means that credit unions will be able to give more focus to their customers, as well as understand and care for them on a more personalized level. Being so local will mean that a small business that wishes to expand, particularly to new locations, does need to consider if the credit union will be able to handle this as well since they are generally intended for local customers.

Credit unions give you a more personalized and valuable experience, though it works best if you remain local to its area.

Posted in 4506-Transcripts, Financial, Small Business Loans | Tagged , , , , | Leave a comment

What are the types of business taxes?

What are the types of business taxes?

The Types of Business Taxes

When running a business, it’s best to keep up with your taxes to avoid penalties. Throughout the year, a business can pay the taxes that they owe from their annual income quarterly or yearly. In many cases, a business chooses to pay yearly, it’s usually during tax season. There are four types of ways a business can file their taxes. With that being said, those ways are employment taxes, income tax filing, self-employment taxes, and excise taxes.

Employment Taxes

If you have employees, you have to pay taxes involving Medicare and Social Security. These employment taxes are required to be paid every quarter. The latest that you can pay them is a month after each quarter is gone. The federal unemployment taxes have to be paid during this time as well. Income tax filing is also included in this category.

Self-Employment Taxes

Self-employment taxes are also a part of business taxes. This comes into play when a person has a legally binding contract with another corporation but are held responsible for paying their own taxes. In some instances, the self-employed will name their business another name beside their government name. Nonetheless, they still have to pay taxes quarterly or annually. When filing their taxes, they can choose the standard deductions where the Internal Revenue Service gives you a standard amount of money that you can file for your business supplies and relationship status.

Excise Taxes

Businesses that own convenience stores or grocery stores have to pay taxes on products and firearm sales. This tax is usually up to 12%. The best part about owning a store is that you can buy your items in bulk and pay the taxes all at one time. When filing with the IRS, there are 4 different forms used. In particular, they are forms 720, 730, 2290, and 11-c.

To be a successful business, it’s best to ask the Internal Revenue Service for any help. In addition to that, there are classes that business owners can take to ensure that they understand how to file their business taxes. With the knowledge of understanding how to file your taxes, your business will be in a better position for years to come.

Posted in 4506-Transcripts, business taxes, Financial, IRS and Tax Transcripts | Tagged , , , , , , , | Leave a comment

Why does my bank need a 4506-T?

Why does my bank need a 4506-T?

A 4506-T is an IRS form also known as a “Request for Transcript of Tax Return.” This form requests that the IRS send you a copy of the tax return information they have on record, up to ten years prior. You can specify a third party to receive your transcript instead with line 5a.

So why is the bank asking for this?

If you’ve applied for a loan, your lender may use this transcript to confirm that the information you give them about your income matches what the IRS has on file. A lender might request this form for any loan, but it’s mostly used for mortgages. This is because, after the 2008 housing crash, lenders are required by law to verify the ability of a potential borrower to pay said mortgages. VA home loans (for veterans) are the exception, though lenders may still ask for a 4506-T.

If you work for a company, the lender may confirm your ability to pay by checking in with your employer. If you’re self-employed, however, the lender will likely wish to check your income history. They’ll be looking to see that you’ve consistently made enough to pay the mortgage and that your income isn’t in decline. The 4506-T helps them to determine this and to verify that the information you’ve provided is correct.

Should I be worried about security?

A year after launching the transcript delivery system in 2014, the IRS noticed a security breach and took the system offline. An audit by the Treasury Department’s TIGTA found that over 350,000 accounts were subject to identity theft thanks to the security breach, and still more were at risk.

In May 2018, another audit by TIGTA was reported, and of the nine recommendations, the IRS addressed six. You can read the details here.

The greatest danger is not following instructions or filling out all relevant items. See how the form looks here.

 

Posted in 4506-Transcripts, Financial, Home Mortgage, IRS and Tax Transcripts, Small Business Loans | Tagged , , , , , | Leave a comment

What happens if you get audited?

What happens if you get audited?

There is a five-letter word most of us fear: audit. Movies and television shows have portrayed being audited as a scary experience with men in suits coming to your home and grilling you like a common criminal. The good news is that audits are not like this. Generally, they are much simpler affairs. So, if you are being audited, here is what happens.

The Most Common Audit

One unknown fact is that over 75 percent of IRS audits are done through the mail. With mail audits, the IRS is seeking clarifications or further documentation for your return. This can happen for simple mistakes, such as a transposed digit, or for larger issues such as a confusing itemized deduction. Generally, if you send back what they need from you the matter will be closed with no further action.

Heading for the Office

The next audit level is an in-office audit. In this case, you should go to your local IRS office. In this case, you may want your accountant or lawyer to attend the meeting with you. You will also want any pertinent documentation pertaining to the issue they want to discuss.

They Come to You

When an IRS agent comes directly to your home or business, this is called a field audit. While this may feel overwhelming, stay calm. They generally reserve a field audit for when a lot of questions arise over an audit, or a lot of red flags appear. In this case, you will want to be prepared with your lawyer, accountant, and documentation.

After the Audit

In many cases, once the audit is over the IRS will accept your documentation and move on. If the IRS finds changes that need to be made in your return, you can either agree to these changes or contest them. If you do contest the changes, be prepared for more meetings and a formal appeals conference. If you are audited, you can likely expect a change to your taxes since around 90 percent of audits result in a change.

Posted in 4506-Transcripts, business taxes, Financial, IRS and Tax Transcripts, IRS Tax Audits | Tagged , , , , | Leave a comment