Absolutely, you can get a business loan with an LLC! Understanding what lenders look for and preparing your application carefully can increase your chances to get a business loan. Make sure to use the loan prudently and maintain accurate financial records.
This will help you repay the loan and make it easier to get more funding in the future if you need it. Starting and growing a business can be challenging, but your LLC can thrive with the right resources and planning.
- 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
Starting a business is an exciting journey. If you’re considering starting a business, you might have heard about an LLC. An LLC stands for Limited Liability Company. It’s a type of business structure that offers protection to its owners from being personally responsible for the company’s debts.
This means if the business owes money or gets sued, the business owner’s personal assets like their house or car are usually safe. But a big question many people have is: Can I get a business loan with an LLC? Let’s explore this topic and break it down in a simple way.
What is an LLC?
Before we talk about loans, let’s understand what an LLC is. An LLC is a business structure that offers advantages of both a corporation and a partnership. It provides limited liability protection, which means that the business owners (called members) are not personally responsible for the business’s debts. This is one of the main reasons why people choose to form an LLC.
Why Would an LLC Need a Business Loan?
Businesses, including LLCs, often need money to start or grow. This money can be used for many things, like buying equipment, renting a space, hiring employees, or marketing. Sometimes, the money the business owners themselves put into the business isn’t enough to cover all these expenses. This is where small business loans can come in.
Types of Business Loans for LLCs
There are several types of small business loans made available for LLCs. Here are a few common ones:
Term Loans: This is a lump sum of money that you borrow and agree to pay the bank back with interest over a fixed period. It’s like a car loan or mortgage but for your business.
SBA Loans: The Small Business Administration (SBA) and fund offers loans specifically designed for small businesses. These loans are backed by the government, which makes them less risky for lenders and easier for small businesses to get.
Business Lines of Credit: This is like a credit card for your business. You get a maximum loan amount that you can borrow, and you only pay interest on the loan amount of money you actually use.
Equipment Financing: If you need to buy new equipment for your business, this type of loan can help. The equipment itself serves as collateral for term loan, which means if you can’t repay the loan, the lender can take the equipment.
Invoice Financing: If you have outstanding invoices (bills that your customers haven’t paid yet), you can get a loan based on interest rate on those invoices. This can help with cash flow issues while you’re waiting for payments.
How to Qualify for a Business Loan with an LLC
Getting a business loan with an LLC is similar to getting a loan for any other type of business. Here are some things lenders typically look at:
Credit Score: Both your personal credit score and your business credit score matter. A higher credit score shows that you’re good at managing money and paying back debts.
Business Plan: Lenders want to see that you have a solid plan for your business. This includes details about what your business does, how it makes money, and how you plan to use the loan.
Financial Statements: You’ll need to provide documents that show your business’s financial health. This includes income statements, balance sheets, and cash flow statements.
Collateral: Some loans require collateral, which is something of value that the lender can take if you don’t repay the loan. This could be business assets like equipment or real estate.
Time in Business: Lenders prefer to lend to businesses that have been around for a while. However, there are other financing options for new businesses too.
Steps to Get a Business Loan with an LLC
Check Your Credit: Before applying for a loan, check your personal and business credit scores. If your or your business day or revolving credit scores are low, try to improve them by paying off debts and correcting any errors on your credit reports.
Create a Business Plan: Make a detailed business plan that shows how your own business line operates and how you will use the loan money to grow your business line.
Gather Financial Documents: Collect your annual revenue, financial statements, tax returns, and other documents showing your own small business that’s economic health.
Research Lenders: Look for lenders that offer loans to LLCs. This could be banks, credit unions, online lenders, or the SBA.
Apply for the Loan: Fill out the loan application and submit it with all the required documents. Be honest and provide as much detail as possible.
Use the Loan Wisely: Once you get the loan, use the money as planned to grow your business. Make sure to make your loan payments on time to build a good relationship with the bank and lender.
Understanding SBA Loans for LLCs
The Small Business Administration (SBA) provides a variety of loan programs to help small businesses, including LLCs, secure the funding they need. SBA loans are particularly attractive because they are backed by the government, reducing the lender’s risk and often resulting in more favorable loan terms for the government agencies the borrower.
- 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
Fund your business yourself with self-funding
Otherwise called bootstrapping, self-funding helps businesses leverage their funds own financial resources to sustain their growth. Self financing can be found through using the bank account or utilizing your 401K to borrow from family members.
Self-funded businesses are fully controlled by you – you accept the risk for yourself. Keep it simple, avoiding spending money that is more than your budget allows, and be particularly careful to access your retirement savings accounts at the beginning. You’ll have to pay hefty fees or penalties if you’re unable to retire early.
Use Lender Match to Find Lenders Offering SBA-Guaranteed Loans
If you’re having difficulty securing business loans, SBA-guaranteed loans could be a viable solution. When banks consider a loan too risky, the SBA can step in to provide a guarantee to preferred lender, reducing lender risk and making them more willing to extend more lines of credit. This guarantee allows banks to offer loans with more favorable terms. To explore these options, utilize the SBA’s Lender Match tool, which connects you with lenders offering SBA-backed loans tailored to your business needs.
Benefits of SBA Loans for LLCs
- Lower Interest Rates: SBA loans typically offer lower interest rates compared to conventional business loans, making them a cost-effective option for LLCs.
- Flexible Loan Amounts: Whether you need a small amount for working capital or a larger sum for purchasing commercial real estate, SBA loans can accommodate a wide range of financial needs.
- Longer Repayment Terms: With extended repayment periods, LLCs can enjoy lower monthly payments, easing cash flow management.
- Access to Larger Loan Amounts: Because the SBA guarantees a portion of the loan, lenders are often willing to offer larger amounts than they would with unsecured loans.
Types of SBA Loans for LLCs
- 7(a) Loan Program: The most popular SBA loan program, providing financial help for businesses with special requirements. It can be used for various business purposes, including working capital, equipment purchase, and expansion.
- 504 Loan Program: Designed for purchasing fixed assets like real estate or equipment, this program offers long-term, fixed-rate financing.
- Microloan Program: Offers smaller loan amounts to help LLCs with startup costs, inventory, or supplies.
How to Apply for an SBA Loan
- Determine Eligibility: Ensure your LLC meets the SBA’s eligibility criteria, including being a for-profit business and operating in the U.S.
- Prepare Your Application: Gather necessary documentation such as your business plan, financial statements, and tax returns.
- Find an SBA-Approved Lender: Use the SBA’s Lender Match tool to find lenders who offer SBA-backed loans.
- Complete the Application Process: Submit your application through the chosen lender, ensuring all information is accurate and complete.
Tips for Success with SBA Loans
- Maintain Strong Financial Records: Accurate and up-to-date financial statements can improve your chances of credit approval.
- Understand the Fine Print: Be aware of any associated fees, origination fees, or prepayment penalties.
- Build a Relationship with Your Lender: Establishing a good rapport with your lender can be beneficial for future financing needs.
By leveraging SBA loans, LLCs can access essential financial resources to support growth and stability, while closing costs and ensuring they remain competitive in their respective markets.
Frequently Asked Questions
How hard is it to get a business loan?
Securing a business loan can vary in difficulty depending on several factors such as your business’s financial health, credit score, and the type of loan you’re applying for. Lenders typically look for a solid business plan, strong financial statements, and a good credit history. Understanding the specific requirements of different lenders and preparing your application thoroughly can improve your chances of approval.
Can you borrow money to start a business?
Yes, you can borrow money to start a business. Many lenders offer startup loans specifically for small business specialist, designed for new businesses. These loans might require a detailed business plan and collateral to secure the loan. Additionally, SBA loans are a popular option for startups due to their favorable payment terms and government backing, which reduces lender risk.
What credit score is needed for a small business loan?
The credit score needed for a small business loan can vary by lender. Generally, a personal credit score of 680 or higher is preferred by most traditional lenders. However, some lenders might consider scores in the mid-600s, especially if other aspects of your application are strong. It’s important to check with individual lenders to understand their specific first business credit cards and other credit approval requirements.
Can I get a business loan with no business income?
While challenging, it’s possible to get a business loan with no business income and bad credit already, particularly if you’re starting a new business. Lenders may require a strong personal credit score, collateral, or a co-signer to mitigate their risk. Additionally, demonstrating a comprehensive business plan and potential revenue streams can help persuade lenders of your business’s future viability.
