Disclaimer: Information in the term loan articles is provided for general information only, does not constitute financial advice, and does not necessarily describe Biz2Credit commercial financing products. In fact, information in the term loan articles often covers financial products that Biz2Credit does not currently offer.

Like many small business owners, LLC business owners might need a loan to expand their business. Get to know everything about LLC loans and how to increase your chances of business funding.

Limited liability companies (LLCs) allow business owners to separate their responsibilities from their business. Although they’re a bit different than traditional small businesses, that doesn’t mean that acquiring a loan is off the table.

LLC business owners might find some added difficulty with getting a loan due to the factor that LLCs separate their personal guarantees from their business. Although that might make lenders a bit unenthusiastic about giving you business funding, it also means that you’ll not be held personally accountable for the loan offer.

But to improve your chances of getting an LLC business loan, you need to consider a few steps — as you’ll see in this article. Get to learn all about LLC business loans, as well as:

• The difference between an LLC loan and a traditional business loan
• Different LLC business loan options
• Tips to improve your LLC business loan approval

After reading this article, you’ll be one step closer to acquiring business funding for your LLC business.

Difference Between a Traditional Business Loan and an LLC Business Loan:

As a limited liability company owner, getting a business loan on paper isn’t any different than getting any other small business loan. But unlike other traditional small business loans, LLC business owners are not responsible for the loan funds.

For lenders, that could make the loan application for your LLC small business loan more difficult as they might demand a signed personal loan guarantee. To avoid putting yourself in dangerous waters, it’s advisable you bypass the signing.

To do so, having some form of collateral — like your business real estate — and having a solid financial track record of your LLC small business could make the difference in your loan application.

Advantages and Drawbacks of Acquiring an LLC Business Loan:

As with any limited liability company, there are advantages and disadvantages to a traditional small business where you’re held personally responsible. Business funding is no different, so before you think about acquiring an LLC business loan, it’s a good idea to look at some points so you can make a more calculated decision afterward.

Let’s look at some of those points and get to know a bit about some advantages and drawbacks:

Advantages:

• It allows you to bypass investors: One of the biggest advantages of securing business funding is avoiding investors for your LLC small business and allowing you to maintain your equity in the company. Another hidden benefit of not having investors is that you can run your business without needing the approval of an investors’ boardroom.
• Interest is tax deductible: Another advantage of acquiring a loan is that, typically, the loan interest you pay is tax deductible. This step can be a tremendous help at the end of the fiscal year and provide a vital lump sum of cash that would end up on a tax bill.
• You’re not deemed personally responsible: As long as you don’t sign a personal loan guarantee, you’re not personally responsible for your LLC loan should you default on the payments. Although that doesn’t mean that your LLC business or the collateral you corroborated your loan request with will be safe, it can avoid judicial implications should the worst come to it.

Drawbacks:

• It requires an extensive loan application process: As it’s typical with a bank loan or an SBA loan, an LLC business loan will most likely require a good chunk of your time to see the application process approved. It’s a good idea to prepare for this scenario and have a financial plan at hand for a few months before you acquire business funding.
• You typically need a strong credit score: As with the lenders discussed above, you will need a strong credit score — up to 650, but it might be higher depending on the lender — and stellar business credentials.
• It’ll likely require collateral: If you don’t sign a personal guarantee, you’ll most likely have to put collateral to corroborate your loan request. Although a limited liability company protects your personal assets and responsibilities, putting, for example, real estate as collateral might be necessary.

Types of LLC Business Loans:

Here we look at some lenders and their loan offers for your LLC business. Any lender has its advantages and drawbacks, and you’ll know more about them below. So, let’s look at some of the best loan programs available for you and your LLC small business.

LLC Bank Term Loans:

Traditional banks have been the lender of choice for many small business owners for decades, and they still offer some very competitive loan offers and obligations. Although having one of the best loan amounts, interest rates, and monthly payments available for any borrower, bank term loans also have a long approval process and are very concerned about qualification requirements.

For limited liability companies, banks tend to require excellent credit scores, strong business financials, and polished bank statements. Also, it’s common for many banks to require at least two or more years of business practice. It might not be the best choice for an entrepreneur starting a new LLC business if you’re looking for fast funding.

LLC SBA 7 Loans:

An SBA loan is another of the most popular loan options for small business owners looking for business funding. For an LLC, the SBA loans are one of the best options you can look for as they are secured by the small business administration. That means credit unions and other lenders have government backing and become more open to providing you funding.

Business owners can get up to $5 million with a repayment period of up to 25 years, with interest rates normally around 7% to 10%. Although it can vary depending on your business credit score, as well as personal credit score if you end up signing a personal guarantee.

As with bank loans, SBA loans are also very time-consuming — taking up to 90 days to complete — and require excellent credentials and credit scores from the borrowers — normally around 700. The small business administration might also take into account your LLCs business structure during the loan approval process. Overall, SBA loans have one of the toughest qualification processes for borrowers. If you have a new LLC or startup without polished statements or need fast funding, you might need to consider other loan programs.

LLC Online Business Term Loan:

Another great option any business owner can look to acquire their LLC financing is online business loans. Many alternative lenders can offer you any type of financing — from term loans to working capital loan — with a much smoother application process than most traditional business financing options.

Online short-term business loans have a much faster approval process, and online lenders are not overly concerned about bad credit, your business cash flow, or your credit history. The only concern online lenders tend to have is that you can achieve your monthly payments, and to do so, many will adapt the interest rates of online loans to your LLC needs.

Although you typically have to pay a significantly higher interest rate than the other traditional lenders — around 8% to 10%, or more in some cases — you can have your repayment terms discussed to better suit your LLC business, and it’s a great option for fast and affordable business funding. In the case of Biz2Credit, you can get business funding within as little as 72 hours and apply with only four minutes of your time. Reach out to our team and discuss the best loan option for you on the same day!

LLC Business Line of Credit:

A business line of credit works similarly to a business credit card. Instead of a lump sum of cash, you receive a credit line on your business bank account — up to $250.000 — that you can use accordingly to your business needs and only pay interest rates on what you end up using.

It’s also a fast type of funding, as you can sometimes get your business line of credit approved on the same business day and use it. It’s ideal to cover some unpredicted financial holes, or if your LLC business offers seasonal products or services, it’s a great way to cover payroll or pay your responsibilities during the slow months.

On the other hand, the biggest drawback of this loan option is that the interest rates can be quite high. They can start at 10% but can go as high as 99%. If you opt for a business line of credit, it’s a good idea to research various types of lenders and figure out what will be the best for your LLC business needs.

LLC Invoice Factoring:

Invoice factoring, also known as accounts receivable, allows you to sell your clients’ outstanding invoices to a factoring company at a reduced price — around 80% to 90% of the invoices’ value.

If your LLC business has a lot of outstanding invoices, this is a speedy loan option that guarantees that your client’s unpaid invoices will get paid, although at a reduced value. The invoice factoring company will give you immediate access to the money upfront, then move to collect the payments from your clients — minus a small fee.

Since the invoices can serve as collateral, this is a great option for an LLC business owner that doesn’t have a polished credit score for other types of business loans. The application process is simple and fast, and you’ll be able to access the capital fairly quickly. However, it carries some significantly heavy repayment terms and interest rates — normally from 10% to 79%.

What You Need to See Your LLC Loan Request Approved:

As with any loan, a lender typically requires extensive documentation from the business owner. In the case of LLC business owners, lenders will not be afraid to be thorough with your documentation, since you're not responsible for the loan amount.

Here you’ll get some tips to improve your chances of seeing your loan request approved:

• Prepare your documentation: Having your documentation at the ready even before you start researching financing options can save you precious time and effort and avoid back and forth with documents. Documentation such as your LLC business license, tax returns, financial statements from the LLC owners, cash flow statements, financial sheets, credit scores, etc., will save you precious time to allocate to your business.
• Have a business plan: A business plan is essential not only for the smooth process of your LLC business but to assure the lender you have a clear-cut idea of what to do with your business funding and how you’ll be able to pay back the loan. A good business plan can put you on top of the lenders’ list and be that extra help to acquire a loan.
• Consider or improve your eligibility: Look at your credit score, cash flow, outstanding debts, and time in business because any lender will want to know this and will base a good percentage of their decision on the factors they have. If possible, try and improve some of those fields. If the lender has a good record of them, you will be one step closer to getting business funding.
• Consider providing collateral: Since LLC business loans do not have the owners’ personal guarantee, lenders tend to be very scrutinous with the loans’ approval, as they need a guarantee. If you can provide collateral, they’ll have a guarantee, and you can even improve your loan obligations if you corroborate valuable collateral behind your loan.
• Research lenders and, if necessary, seek help: Not all lenders are the same, and if you take some time to research the market, you most likely find better options, and you might also avoid loans with predatory fees. Another way you can improve your chances of getting business funding is with a business loan expert that’ll research lenders on your behalf. But make sure that the expert has experience in working with LLC businesses.

Find the Perfect LLC Business Loan for You at Biz2Credit:

Getting funding for your LLC business might be very time-consuming and scrutinous, as one single factor can lead to more time to evaluate your eligibility, or it can even get your loan approval process denied.

If you’ve experienced this factor with traditional institutions — or if you’re choosing to avoid them altogether— reach out to Biz2Credit and get your LLC business loan approved within as little as 72 hours! Complete our online application with as little as 4 minutes of your time, or reach out to our team and personally discuss with our business funding specialists the best course of action for your LLC business.

FAQs

How to get a business loan with an LLC?

You must first establish your LLC to obtain a business loan with an LLC. Study different loan options such as SBA loans, equipment financing, invoice factoring, lines of credit, and merchant cash advances. Consider factors like your credit score, business financials, and loan amount. You'll often need to provide a personal guarantee. Compare lenders to find the best terms and gather necessary LLC documents for the application process.

Is it easier to get a business loan with an LLC?

Yes, it can be simpler to get an LLC loan. Specific lenders won't lend to sole owners. Therefore, settling your business as a legal commodity can make it easier to access financing. It could help lessen lender bias, according to a recent Journal of Marketing Research study suggests.

What credit score does an LLC start with?

An LLC starts with no credit score. Like an individual, an LLC must build its credit over the period of time by engaging in liable financial behavior, like taking out loans and lines of credit and doing timely payments.

How big of a loan can a new LLC get?

Prospective borrowers have three funding options: business term loans, lines of credit, or SBA loans. Funding Circle term loans vary from $25,000 to $500,000 with six months to five years repayment terms. Business lines of credit through Funding Circle offer credit limits between $6,000 and $100,000.  

Will a bank give a loan to a new LLC?

An LLC loan is any business loan that funds small businesses and is organized as a limited liability company. This loan is different from a typical type of loan that you see being offered by a lender. Instead, these are business loans through credit unions, traditional banks, and online lenders.

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