How to get an LLC business loan

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    Chris Godfrey

    Page written by Chris Godfrey. Last reviewed on July 11, 2024. Next review due October 1, 2025.

    An LLC loan is a business loan for limited liability companies. In reality, there is no difference between an LLC loan and other types of business loan. The term ‘LLC loan’ is applied to make it clear that these loans are aimed at business structured as LLCs. Read on to find out more about the different types of LLC loan, how they work and what you must do to get one.

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      How to get an LLC business loan: Step by step

      Securing your LLC loan can be fast and simple. Follow these steps to get the funds your business needs:

      Check your credit score

      It is common for mistakes to occur on credit reports, but incorrect information could have an adverse impact on your loan application. Business credit scores are usually graded from 1 to 100 and are different than personal FICO scores. A good business credit score is 80+ and a good FICO score is 680+. If there are errors on your business or personal credit reports, get them fixed before applying for an LLC loan. Be aware that fixing a credit score can take time and there are no ‘fast credit repairs’ despite the many promises from online ‘credit doctors’ who say they can perform miracles for your score.

      Choose the right type of LLC loan

      Some loans will work better for your LLC than others. Should you go for a term loan or a line of credit? Which loans are cheapest? Which are the fastest to secure? How much collateral will you need to provide? Research all the funding types you may qualify for before settling on your final option.

      Popular types of LLC loan

      Loan typeWhat is it?
      SBA loansSBA loans are partially backed by the US Government and usually come with much lower interest rates and fees than other commercial lending. Although there are many types of SBA loan, SBA 7a, and SBA express may suit the needs of LLC owners best.
      Business term loansThe simplest and most common type of LLC loan. You receive a single, lump-sum cash injection and then pay it back in regular instalments over a fixed period of up to 25 years. Collateral may be required.
      Revolving line of creditFunctions like a high-value credit card but comes with lower interest rates and fees. LLCs can withdraw as much as they want when they want from a loan facility up to the limit of their borrowing. A line of credit can give you excellent peace of mind – you have access to funds when you need them, but you only pay interest on the sums that you withdraw. Collateral may be required.
      Equipment loansEquipment loans are an ideal way to buy expensive machinery and equipment. Spread the cost over time to take the strain off cashflow. Equipment loans use the assets you’re financing as security, similar to a car loan or a residential mortgage, meaning there is no need for added collateral.
      Merchant cash advanceAvailable for LLCs that accept customer payments by credit and debit card. You borrow against the value of your card sales. As your card sales increase, your borrowing limit goes up. Pay the loan back with a fixed percentage of your card sales on a daily, weekly or monthly basis. Your sales act as security for the loan, no added collateral is required.
      Revenue-based financingFunctions like a merchant cash advance but with higher borrowing limits. Based on the size and regularity of their total revenues, (not just their credit card sales), LLCs may receive a lump sum and pay it back over a short-term schedule, typically by small deductions from their daily sales.

      Calculate how much debt you can afford

      Do your homework to accurately calculate how much you need to borrow and what you can afford to repay. Depending on what you need the funds for, it may make sense to include an extra sum for unexpected costs in the sum you request – this is known as a ‘contingency fund’ and is typically calculated as an extra 5% or 10% of the base sum you require. Keep in mind that you will need to present a strong case for funding to secure an LLC business loan and your financial records should support this need. Indicate why you need the sum you are asking for, how the loan will deliver your plan – and critically, how you will pay the loan back.

      Top tip: Increasing the size of your down payment or offering assets that can be used as collateral for the loan can improve your chances of approval.

      Compare LLC lenders

      It makes sense to shop around for different LLC loan offers before settling on a lender. You can do this by approaching banks, credit unions and online lenders one by one, or you can use the services of a loan marketplace that will introduce you to a choice of loan deals from different lenders. Some marketplace platforms can also give you advice and help you with the application process. This can be especially useful for LLC owners who have never taken out a business loan before. 

      Gather necessary LLC loan documents

      Every lender will have their own list of required documents, but most will need to see bank statements (at least 18 months), balance sheet, profit and loss statements, cashflow projections, list of debts, list of assets, customer database, articles of incorporation, business licenses, certificates of good standing, tax returns and more. 

      Apply for your LLC loan

      Make sure you are within the deadline stipulated by the lender before submitting your application and ensure you have provided all the necessary documents and information they require. Keep in mind that processing times can vary enormously, with some providers taking many weeks to arrive at a final decision and disburse their funds. 

      If you need funds in a hurry, you may be eligible for a fast LLC loan. Start that process here.

      Review your loan agreement and receive funds

      When your loan approval comes through, make sure you read and understand the terms and conditions of the loan you are accepting. If there are any points you are unclear on, go back to the lender for further clarification. Once you sign and return the loan contract your funds should appear in your business bank account within the timeframe set by the lender – anywhere from same day to a couple of weeks.

      What are the pros and cons of LLC loans?

      The advantages and disadvantages of LLC loans will vary according to the type of loan you choose. Key positives and negatives include:

      Pros:

      • Flexible financing – there are many types of loan and you may qualify even with bad credit
      • Can fund very quickly with certain types of loan (e.g: merchant cash advance)
      • Low interest rates for borrowers with good credit
      • Chance to build business credit and establish a good payment history

      Cons:

      • Collateral or personal guarantee may be required
      • Interest rates can be high for new businesses and borrowers with weak credit

      What are the alternatives to LLC loans?

      If your LLC doesn’t qualify for a business loan, there may be other ways to secure the funds you need:

      Grants

      Business grants are another option for LLC owners. Unlike business loans, the major advantage of this type of funding is that you don’t need to repay the money. However, the downside is that it can be very tough to secure a grant. They are often restricted to specific locations, industries or causes, making it difficult to qualify.

      Five places to find business grants for LLCs:

      External investors

      There are networks of venture capitalists and angel investors readily available online. Bringing in external investment can give you the cash you need and may also deliver a unique and extra set of skills and contacts that can help your organization grow even faster. 

      Note that investors will usually want a piece of the action in exchange for their money. This will mean you giving up a share of your ownership and may loosen your overall control of the business. Some investors may also want higher dividends or royalty payments as well as their share of equity. Venture capitalists and angel investors are also notoriously picky about the businesses they choose to back. You could spend many months pursuing one lead after another before you find the right match. 

      Crowdfunding

      Available via various online platforms, crowdfunding can bring in large sums if your presentation hits the right spot. Although it may be tough to raise big money in small donations from hundreds of donors, you will pay no interest charges and you do not need to repay the money if you spend it where you said you would. An eye-catching idea and a powerful pitch is essential to succeed with this funding option.

      Get started with Swoop

      No matter if you’re seeking your first LLC loan or you’re a seasoned borrower, working with business finance experts can make all the difference when applying for funding. Contact Swoop to discuss your borrowing needs, get help with your application and to compare high-quality LLC loans from a choice of lenders. Give your organization the financial boost it deserves. Register with Swoop today.

      Written by

      Chris Godfrey

      Chris is a freelance copywriter and content creator. He has been active in the marketing, advertising, and publishing industries for more than twenty-five years. Writing for Wells Fargo Bank, Visa, Experian, Ebay, Flywire, insurers and pension funds, his words have appeared online and in print to inform, entertain and explain the complex world of US consumer and business finance.

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      At Swoop we want to make it easy for SMEs to understand the sometimes overwhelming world of business finance and insurance. Our goal is simple – to distill complex topics, unravel jargon, offer transparent and impartial information, and empower businesses to make smart financial decisions with confidence.

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