Can My LLC Get A Loan?

When you run an LLC, you’re at the helm of a business that has many of the scalability benefits that other business types don’t.

Maintaining and expanding a business can take the money you don’t have. Whether it’s insurance payments, hiring, marketing, or the replacement/repairing of equipment, LLCs sometimes need a loan to get ahead of the game.

Can My LLC Get A Loan

Fortunately, LLCs are eligible for the correct loans. Since the only limit to an LLC’s success is your ambition and the depth of your wallet, taking out a loan is not only possible but viable as a way of financing your business.

The process of taking out LLC loans usually follow these steps:

  1. Choose the loan you wish to apply for.
  2. Gather the required documents outlined by the loan.
  3. Apply and review loan offers.
  4. Accept the terms of the loan and receive payment.
  5. Pay the loan back within the given repayment period.

Here are six types of LLC loans that are available to you right now. If you have the required documentation and a good financial history, you should be able to secure any of the six loan options below.

LLC SBA Loans

The Small Business Administration is an organization that offers loans cosigned by the U.S government. With most loan types, an SBA loan is considered the best option available to you.

Naturally, these loans also tend to have the strictest acceptance standards too. For example, you’ll need a credit score over 600 and as much as $100,000 of annual revenue, which bars most startups from even competing for these loans.

You’re dealing with the government, so you need to hack through a wall of bureaucratic red tape because you get the loan. They’re also highly competitive since SBAs are the first and best stop for questing entrepreneurs searching for a loan.

If you do get the loan, however, you can enjoy some of the best interest rates, repayment terms with low monthly payments, and the highest loan amounts since the lenders have less risk to worry about.

LLC Bank Loans

Banks offer loans to LLC businesses too. Many people first think of the bank when loans come to mind, and for good reason since they have low-interest rates and a lot of cash to hand out. That said, bank loans are second to SBA loans in how strict they can be.

The exact requirements will depend on your bank, your history with that bank, and, most importantly, your credit score. There’s also a lot of paperwork to be filed and they tend to have long wait times.

Liability will be a concern when you apply for a loan. As an LLC, you have personal liability protection but many banks will ask for this to be waived for the loan. These personal guarantees of repayment from the business owner usually come in the form of a promissory note.

These establish that you will pay the loan back and are liable for it regardless of your liability protections for other business finances.

Note that the loan must be a reasonable amount too since the IRS can and will view large contributions as an additional capital contribution that may be taxed.

LLC Unsecured Loans

Unsecured loans are also available for LLCs. They’re great for those who want a loan without having to put collateral forward as security. All you need are the relevant documents and a credit score over 350, less than many other loans.

There’s no risk to your assets when you take out one of these loans, which can last from six months to twenty-four months. The downside here is that you can expect higher interest rates.

LLC Invoice Factoring

If your LLC runs invoices, then you may benefit from LLC invoice factoring. This is where the lender can pay up to 90% of the value of unpaid invoices so you can get immediate compensation.

Any percentage not factored into this advance is then paid once the invoice payments have been collected, with service charges deducted. Simply put, invoice factoring is a way to free up cash that’s already existing in your company, just not available due to unpaid invoices.

These loans can take anywhere from one week to fourteen weeks to be paid off, they’re very short-term. Your credit score needs to be 530+ and you need any relevant documentation.

LLC Merchant Cash Advance

Merchant cash advances are another quick business loan that’s available for LLC owners. Also called an MCA, these loans award you a lump sum that you pay back as you spend with your debit or credit cards, through the lenders taking percentage cuts.

This means you can naturally pay the cards back as you run the business.

You’ll be expected to pay MCAs back quickly and those high-interest rates incentivize a fast repayment. With MCAs, you get cash fast with a high-interest rate, providing your score is 500+ and you can pay the loan back within the same year. 

LLC Line Of Credit

Business lines of credit loans are also available for LLCs. These function similarly to credit cards, where you can use the awarded funds for pretty much any purchase. You also only pay interest on the funds you use, not the total credit that’s available to you.

Lines of credit are different from most loans as they act more like a safety net than a typical loan. 

You can use the funds when you need them and spend them on anything. To access them, you’ll need to have a credit score over 300 and beware of penalties that you may be subject to if you’re late on making payments.

Can An LLC Get A Loan With No Credit?

One of the main barriers to securing a loan is your credit score, no matter which kind of business you run. You’ll have to accept that many lenders won’t take a chance on people with bad credit.

Fortunately, there are three things you can do to make your applications more palatable for lenders.

  1. Have a business plan. This shows you’re serious about the loan and have outlined why it’s required and how you’ll spend it. Present a business plan even if the lender doesn’t require it for the application process.
  2. Add collateral. Putting your money with your mouth is can increase trust with the lender. Your lender will get the collateral if you can’t pay, so they still get something in the event your repayment fails. Avoid putting personal assets like a home or a car as collateral.
  3. Get a cosigner who has a good credit score. By cosigning, the person with a good credit score will take on the loan payments if you can’t. This is a big ask for many, so it should be a family or friend that you trust.

Can An LLC Get A Personal Loan?

Personal loans are also called unsecured loans and, yes, you can get them if you run an LLC. With these loans, you don’t need to put forward collateral to secure them.

This doesn’t mean there aren’t consequences for missing payments, however, as the lender can and will take legal actions demanding repayment.

If the lender is not confident that you’re creditworthy then they may ask you to sign a personal agreement. These waive the liability protections that come with running an LLC, so you will be personally liable if you cannot pay the loan back. 

From there, the documentation and acceptance criteria will vary depending on how much you’re requesting and which institutions you’re petitioning for funds.

Can An LLC Get An SBA Loan?

The Small Business Administration is one of the most competitive loan-granting agencies in the US.

As an agency of the US government, they’re sitting on the largest stacks of cash and have much less lending risk than private institutions. They also offer a wide catalog of loans and, yes, that includes SBA loans.

It should be noted that SBA loans require the most documentation and business experience out of most lending organizations.

You’ll need upwards of $100k annual revenue across two years of business operation for most loans and you’ll need to present a business plan and debt payment schedule, which are optional for many other organizations.

You’ll also need a high credit score of over 600. These goals alone stop startup LLCs from acquiring SBA loans. If you can match these requirements, then you can get an SBA loan as an LLC.