September 14, 2022 | Last Updated on: September 6, 2024
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:
After reading this article, you’ll be one step closer to acquiring business funding for your LLC business.
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.
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:
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.
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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.
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.
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 loans — 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!
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.
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%.
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:
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.
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