Migrating to the United States is an alternative for millions of people who wish to achieve a better quality of life; it implies leaving behind family and loved ones to go in search of new opportunities. As of 2018, there were 44.8 million immigrants living in the United States, representing 13.7% of the population, according to figures from the Pew Research Center.
One of the most complex tasks is finding employment since, for most immigrants, their immigration status limits their possibilities. For this reason, one alternative to make their way into the economy is to establish their own business. In this segment, there is also a major limitation: access to financing.
The Stanford Graduate School of Business supports this statement; according to information published by the same university, 70% of Latino entrepreneurs in the United States use their own savings to start their businesses.
The requirements that traditional banks ask for in order to offer a loan or any financial product do not consider the conditions and needs of Latino immigrants, which for most are unattainable. Given this scenario, ITIN loans from Camino Financial become some of the best alternatives to help establish a business in the United States.
What are ITIN loans?
The first thing you need to know about is that they are financial products that do not require a social security number; you only need to have an ITIN (Individual Taxpayer Identification Number). This number is granted by the IRS (Internal Revenue Service) to foreigners living in the United States so that they have the possibility of building a patrimony within the legality with the benefits and obligations that entails, for example, the payment of taxes.
The benefits of having an ITIN number are:
– Opening bank accounts
– Payment of taxes
– Access to financing in financial institutions
– Generate credit history
To obtain this number, you will need to fill out a W-7 form, present an identity document, such as a passport or driver’s license, and attach a completed federal tax return. This documentation must be mailed to your local IRS office or filed in person. There are specialized agencies that can assist you with advice on how to complete this process.
Once you have your ITIN number, you will have to take into account other steps to be eligible to apply for those loans. Take note of the process you will need to follow to access business financing as an immigrant in the United States:
Register your company as a DBA (doing business as)
To be considered as a formal entrepreneur, you will have to register your business with the local authority. Carrying out this process does not change your immigration status, but it makes it possible to carry out business activities, and you will demonstrate the legality of your company before financial institutions. On the Internal Revenue Service (IRS) website, you will find all the details to register with the authority in the state where you reside.
Opening a business bank account
Going to a financial institution and requesting a loan for your business with personal bank documentation is considered bad practice since it shows that your project is not yet solid enough to generate income on its own. The recommendation is to open a commercial account in which you enter the resources obtained by the operation of your business, making it coincide with your financial statements, gives certainty to the lender about your ability to pay in time and form.
Accessing ITIN financing can be the boost your business needs to grow. With this type of financing, you will be able to build a business capable of competing with those currently in the market. No matter what your niche is, it is advisable that you make a business plan where you establish the objectives, the strategies you will follow to reach them, as well as the resources you have to achieve them.
No business is too small that it doesn’t need planning. At any stage of your project, you can improve it. To simplify this task, you can use the Business Model Canvas, a very practical methodology that will allow you to give shape to your idea and visualize all the aspects that you should consider when starting a business.
According to the 2017 Small Business Credit Study, 45% of Latinos who were denied credit at traditional banking institutions had an insufficient credit history. Accessing ITIN loans will be the first step to generate a good credit score and open doors to better financing in the future.