A limited liability company (LLC) is a type of business structure that protects small business owners. When forming an LLC, you protect your personal assets from liability for business debts.
An LLC loan can be a good option if you need funds for your LLC. Despite the advantages of working capital before securing a loan, LLC loans sometimes require you to give up your protections. Before you get an LLC loan, here is an overview of the pros and cons of LLC loans.
- Fastest funding 1 business day
- Min. time in business 6 months
- Term lengths Up to 60 months
4.8
- Loan amount Up to $500,000
- Min. time in business 6 months
- Min. annual revenue $250,000
4.8
Best for large business loans
- 3 Months in Business
- $10,000 in Monthly Rev
- Minimum Credit Score 550
4.9
Best for large business loans
- up to $1.5 million
- APR range Not disclosed
- Minimum Credit Score 570
4.7
Best for Small business loans
- Apply in Minutes
- No Hidden fees
- Wide range of Options to choose from
- Get funded in as little as 24 hours*
4.8
Pros
- Easy Access to funds
- Multiple Selection options
- LLC loans can help build credit
Cons
- Personal liability
- Can be more expensive
- Limited declaration requirements
Pros of LLC loans
LLC loans are a more popular financial and business expansion solution for small businesses. Here are the reasons why these loans stand beneficial
Easy Access to Funds
According to the reports from CB Insights, the most faced problem due to which startups don’t succeed is that they run out of cash or they can’t afford new investments. But an LLC loan can cover these financial needs when you experience that the expenses exceed from the profit of the business. LLC loans are often used to start a new business or purchase real estate, inventory or equipment.
Multiple Selection Options
LLC loans can be accessed through credit unions, traditional banks or online banking. You can choose any of the following types of LLC loans:
- Banks Loans, which are best for established businesses
- Term Loans are best for long-term investments
- Business lines of credit for covering short-term expenses
- SBA loans are the best option if you are seeking an affordable loan and don’t have access to other financing options
- Equipment Loans are best for equipment purchase
LLC loans can help build credit
Some LLC loans can help build business credit if the lender reports your account activity to the credit bureaus and you manage the loan very well. It’s common for traditional banks and credit unions to report account activity. Financial institutions may also report small business loans made to credit bureaus.
Keep in mind that some lenders don’t report to the credit bureaus. This often happens in merchant cash advances, invoice financing, and invoice factoring. Make sure to deal with a lender to see if he reports to credit bureaus and ask which bureaus they report to.
Cons of LLC Loans
LLC loans also have some disadvantages to consider.
Personal liability
While an LLC can protect your personal assets from business debts, lenders often bypass this by asking for a personal guarantee. By giving a personal guarantee to get a business, you agree to take on personal responsibility for repaying the loan if your company can’t. This means that if your business can’t pay back the loan, the lender can go after your personal assets.
LLC loans can be expensive
LLC loans with the lowest interest rates are typically given to borrowers with good to excellent credit scores. If your credit score is lower, you’ll likely pay more for funding. High interest rates are common for bad credit business loans, such as merchant cash advances, invoice factoring, and invoice financing.
Even with a business line of credit, you may be considered to pay a lot in interest, regardless of your credit score. Interest rates can be variable, meaning they might start low but could rise significantly with market changes.
Limited disclosure requirements
Consumer lenders must reveal the annual percentage rate (APR) to borrowers on consumer loans business credit cards, as required by the Truth In Lending Act. This information is provided when you apply for a loan or credit card; it helps you understand the expected borrowing costs.
However, this rule does not apply to business loans. Business lenders aren’t required to show their rates and fees on their websites or provide APRs. Instead, they might use simple interest or factor rates, making it more challenging for business owners to compare different lenders.
An LLC loan can help your business grow if you’re making a profit but need extra funds to seize growth opportunities. It’s important to compare the different types of LLC loans to find the best fit for your company and weigh the pros and cons of your business grants each option. Additionally, consider exploring various alternatives to LLC loans if the drawbacks outweigh the benefits for your business.
Increase your business’s potential with an LLC loan today! Compare loan options, find the perfect fit, and seize growth opportunities. Sign up with Cashably now and give your business the growth increase it needs!
Check your credit score
Some lenders use credit score and credit history in their loan decisions. It can be obtained via Dun & Bradstreet, Equifax and Experian. Your credit score can also be assessed to determine the amount you qualify for and what interest rates you’ll get.
Credit scores range between 650 and 900 a day and the better. As part of your credit report, your credit rating also helps determine how you manage your debts.
American Express® Business Line of Credit*
Minimum credit score 660 at time of application. Monthly fee Varies depending on the loan term, please see the loan details. The repayment term includes six, 12 and 24 months with monthly fees from 3% to 9% on six-month loans, 6%-18% on 12-month loans, 97% on 18-month loans, and 126% to 18% on 24-month loans.
Choose the right type of LLC loan
LLC loan options are numerous. Before making a purchase, you must review the Credit Score guidelines. Light bulb icon banksrate insights Limited liability firms offer protection against personal liability when your firm defaults on a loan.
However, lenders bypass this requirement and impose a minimum guarantee for the majority owners. No legal entity can protect your personal assets against an unauthorized borrower.
Why Choose an SBA Loan for Your LLC?
When it comes to obtaining loans in LLCs the selection of loans can become overwhelming. You have to make certain the loan will help you to improve your business. The loan is designed with your firm’s creditworthiness. Selecting SBA loans offers a number of advantages over traditional loans.
How an LLC loan works
Unlike other businesses, LLC loan programs have similar functions. If borrowers approve LLC loan applications they will be given money in lump sum of sums and be given the option of withdrawing funds if you choose to withdraw the money. In some LLCs the amount of the debt can vary.A buyer may have to provide a loan amount to repay the loan in repaid terms of the loan.
Business loans require collateral, for example equipment or other assets, to support the loan. Unsecured business loans however do not demand collateral. The interest rates you pay are fixed and can be variable so that your repayment period is not affected and it can go up or down.
Gather necessary LLC loan documents
After applying, you should have all the required documents to show to the bank. Several loan providers will ask for additional paperwork. If secured loans were given you should also provide details. Get in touch and ask the lender for information before applying.
Bank rate information Secure loans are financing solutions which require you to put up some kind of asset which acts as a security. If this asset is taken from you a credit check could result in the loan being returned.
Apply for your LLC loan
Generally the lenders offer LLC loans. Online lender can accept applications online or upload supporting documentation to online dashboards. Generally speaking, the decision is made within hours or within working days. A typical lending company might take several days to respond to your request.
Usually waiting periods are longer in the case of SBA loans. After approval, the loan officer prepares documents for review and signing. Once the application has been processed, funds will reach your account. The funding time will vary depending what type of loan you choose.
Review LLC loan requirements
Understanding typical small business loan and requirements can give you a good sense of what type of loan is available for an LLC. Even though qualifications vary among lenders, it is likely the person will have: A good credit score.
Your personal credit score will be required to obtain business loans at most competitive rates. Free credit scores are available for business credit with NerdWallet, Equifax, Experian, and dnba. It was a long day at the office. Banks usually lend to a company that has existed for a minimum of two decades. Online lending is a more flexible option for a new LLC.
Apply for an SBA Loan with Texas Gulf Bank
Texas Gulf Bank provides a range of affordable banking services in the Southeast Texas Gulf Coast region. The company provides comprehensive assistance to small business administration SBA loans throughout all phases of the lending cycle.
We are specifically geared towards helping your LLC get started by providing SBA Loans. Dennis has been with Tex. Gulf Bank since 2014 helping hundreds of small businesses create new businesses.
Tips for Comparing LLC Loans
The requirements of potential borrowers are unique. Some lenders may require time to complete their own business plan or annual revenues to make the process harder for younger corporations. Others will often offer financing options not available to all LLCs. Tell me the most important factor when comparing loans for LLCs:
Can LLCs use personal loans?
A business owner can borrow money through his or her own personal loan if he or she has a limited liability company, depending upon the lending institution. The loan can help pay LLC filing fees and startup costs for new businesses, as well as the costs associated. Personal loans are also more affordable for businesses and individual loans—particularly LLC’s with zero demonstrable profits.
Despite this, the company owner has to pay personal debt in the course he or she must repay the loan. Unless the borrower is late or in default, that may adversely affect his or her credit history – not those of an LLC.
Frequently Asked Questions
Is it hard for an LLC to get a loan?
Business loans are usually easier to apply with an LLC. Often businesses with small incomes will struggle to qualify for the program, especially with traditional banks and financial institutions.
Do banks give loans to LLC?
You will find LLC loans in banks, credit unions, online lenders and SBA Partner companies. We will show you some of our favorite lending options as well as some useful ways to get your loan.
Can you take a loan from your LLC?
A member can take money out of an LLC. Those who have incorporated the LLC are also responsible for approving the loans and reporting the authorization on the LLC’s minutes. A loan to a member may only become considered a loan when the LLC has a legallyenforceable promissory note for payment of the loan.
How much can I borrow with an LLC?
Prospective buyers can choose from three types personal finance: business loan, credit lines and loans for SMEs. Financial Circle loans have repayment terms of between $250,000 and $50000 with a repayment period of between 6 months and five years. When a business loan is available the credit lines will vary from $6000 to $100,000.
- Fastest funding 1 business day
- Min. time in business 6 months
- Term lengths Up to 60 months
4.8
- Loan amount Up to $500,000
- Min. time in business 6 months
- Min. annual revenue $250,000
4.8
Best for large business loans
- 3 Months in Business
- $10,000 in Monthly Rev
- Minimum Credit Score 550
4.9
Best for large business loans
- up to $1.5 million
- APR range Not disclosed
- Minimum Credit Score 570
4.7
Best for Small business loans
- Apply in Minutes
- No Hidden fees
- Wide range of Options to choose from
- Get funded in as little as 24 hours*
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