What is an LLC loan?
LLC loans are marketed to limited liability companies. They are similar to other business loans and include term loans, lines of credit and SBA loans. Small-business owners might use LLC loans for working capital, inventory, marketing or startup costs.
A significant benefit of an LLC is the separation of business and personal assets. Your personal assets are protected in the event of default, and only business assets can be seized. However, many lenders require personal guarantees, which hold the borrowers personally liable for repaying loans.
How do LLC business loans work?
Traditional banks, credit unions and online lenders offer LLC loans. You can apply for one online or in person. LLC loans can be secured or unsecured.
LLC loans often provide upfront payments but also include revolving accounts, such as lines of credit. Interest rates can be fixed or variable, and business owners make payments daily, weekly or monthly. To qualify for an LLC loan, you might need to meet credit, time in business and income requirements.
Common types of LLC loans
Small-business owners have many options when considering an LLC loan.
Term loans
A term loan provides a lump sum you repay daily, weekly or monthly. Interest rates can be fixed or variable but are typically lower than those of other business loans. Term loans have predictable payments and can help businesses grow.
Business lines of credit
Business lines of credit are similar to credit cards, providing revolving accounts that let you borrow up to a set limit. You pay interest on what you borrow, but rates can be higher than those of term loans. Making payments replenishes your available credit.
SBA loans
SBA loans are backed by the Small Business Administration and can have low rates and long repayment terms. However, you must exhaust nongovernment financing options to qualify.
Equipment financing
These loans are secured by the equipment itself. The upfront cost is small, but you might need to provide a down payment. Equipment financing typically has fixed monthly payments.
Commercial real estate loans
A commercial real estate loan is similar to a personal mortgage but pays for a storefront or office. The property secures the loan, which can have a fixed or variable interest rate, and you usually pay over seven to 30 years.
Invoice financing
Invoice financing provides an advance of up to 90% of your unpaid invoice value. When customers pay their invoices, you repay the advance plus interest and fees.
What are the requirements for an LLC business loan?
LLC business loan requirements vary by lender but might include the following:
- Annual revenue: Many lenders require a minimum annual revenue, such as $100,000.
- Time in business: Lenders might require at least two years in business, but some consider newer companies.
- Credit profile: Some lenders consider borrowers with personal or business credit scores below 600, but many require scores in the low to mid-600s.
- Industry: Businesses in certain industries, such as gambling, might not qualify.
- Loan purpose: LLC loans have many uses, but you might have to specify your intended purpose on your application.
How to get an LLC business loan
These steps can help you qualify for an LLC loan.
1. Clarify your funding needs and limits
Know your funding needs and how you plan to use the loan before applying. For example, do you want a commercial real estate loan to pay for an office building or a short-term loan to cover payroll this month? The amount you borrow can vary depending on your goals.
2. Check your credit and eligibility
Business credit and personal credit can impact LLC loan eligibility. Many credit card companies and other lenders let you view your estimated personal credit score for free. You can check your business credit through Dun & Bradstreet, Experian and Equifax.
3. Choose a loan type
Business loans can vary significantly by type. Some provide short-term, flexible financing, while others require repayment over 30 years. If you struggle to qualify for a term loan, consider other funding options, such as invoice financing. Invoice financing might have higher borrowing costs than a traditional business loan but can help companies with urgent funding needs.
3. Research and compare lenders
Research and compare traditional banks, credit unions and online lenders offering LLC loans. Note their amounts, interest rates, fees and eligibility requirements. Prequalify with three to five lenders offering the best rates and terms. Prequalification is not an offer of credit, and final rates might be higher.
4. Prepare required documents
Documentation requirements vary by lender. However, you typically must provide identification information, personal and business bank statements, a business plan and financial paperwork.
5. Complete your application
Complete your application online or in person. Provide the required documentation. If the lender asks follow-up questions, respond promptly to avoid delays.
6. Review and sign your loan agreement
Once your application is approved, review the loan agreement, including rates and terms. Sign the loan agreement to accept it if the details are as expected. Then, begin making payments on the loan.
How to compare LLC loans
When comparing LLC loans, be aware of details such as:
- Interest rates: Interest rates vary by lender. Some lenders use factor rates, which can result in higher borrowing costs.
- Funding flexibility: Some lenders are more flexible than others, offering many loan types and repayment terms.
- Borrowing limits: Borrowing limits can be $100,000 or $5 million or more. Look for lenders that meet your borrowing needs.
- Eligibility criteria: Lenders often have revenue, time in business and credit requirements.
- Funding speed: Some lenders offer funding within one to three business days, while others might take longer.
- Repayment terms: You often must repay your loan in one to five years. However, some lenders offer longer terms.
Alternatives to LLC business loans
If LLC business loans aren’t the best fit, consider alternatives.
- Business grants: Business grants don’t require repayment but are often highly competitive.
- Personal loans: Not all lenders let you use a personal loan to pay for business costs, but some do.
- 0% intro annual percentage rate (APR) credit cards: Some credit cards have attractive offers, such as 0% introductory APRs, which can help you cover short-term business costs.
- Personal savings: If you have substantial personal savings, you can use it to pay for business expenses.
- Equity investors: Equity investors provide cash in exchange for company shares.
- Crowdfunding: Crowdfunding lets you fund your business through donations or investments from many individuals.
How BuySide rates business lenders
We evaluated 28 small-business lenders, focusing on key areas such as affordability, loan options, underwriting requirements, transparency and customer experience. Advertisers and partners don’t influence our methodology or ratings, as our research and editorial team maintains independence in using data-driven processes. We assessed each lender based on characteristics business owners might find appealing, such as offering traditional business loan products, discounts, application guidance, bad-credit options and solutions for short-term funding needs. We focused on lenders with at least $1 billion funded that have been in business for five years or more. We also verified that the traditional and online lenders offer loans in most states. Learn more about how Buy Side rates the best small-business loans using data-driven methodologies.
We weighted five factors to come up with our ratings:
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