LLC Loans: Overview and How to Get One

If you operate a limited liability company (LLC), a range of business financing options can offer the capital you need. LLC loans can help you fund startup costs, inventory and equipment purchases, business expansion and more.

What is an LLC loan?

An LLC loan is a small-business loan that provides funding for a limited liability company — a type of business structure that functions like a hybrid between a corporation and a partnership.

LLC loans are available from banks, credit unions, online lenders and SBA lenders.

In reality, these products are the same as any other type of business loan — most small-business loans do not have qualification requirements specific to the legal structure of a business. The right LLC loan for your business depends on factors such as your funding needs and qualifications.

How an LLC loan works

LLC loans are similar to other business loans in how they work. If you are approved by the lender for an LLC loan, you’ll receive the money in a lump sum or be approved for a set amount of funds that can be withdrawn at your convenience.

Depending on the type of LLC loan, you may be asked to offer assets as a way to ensure repayment of the loan. A secured business loan requires collateral, like equipment or another asset, to back up the loan. An unsecured business loan, on the other hand, doesn’t require collateral.

The interest rate you pay may be fixed, meaning it won’t change during the loan term, or it may be variable, which means it’s not set and may go up or down.

The amount and frequency of your loan payments will be decided by the lender. You may be required to make monthly, weekly or daily payments based on the terms in the business loan agreement.

Best LLC loan options

How to get an LLC business loan

You can get a business loan for your LLC by following these steps:

1. Review LLC loan requirements

Understanding typical business loan requirements can give you a solid idea of the types of financing that will likely be available to your LLC. Although qualifications vary from lender to lender, they’ll likely consider:

• Personal credit score. You’ll likely need a personal credit score of at least 690 to qualify for business loans with the most competitive rates and terms. You can get a free personal credit score with NerdWallet and review your business credit score through Equifax, Experian and Dun & Bradstreet.

• Time in business. Banks and SBA lenders usually lend to businesses that have been around for at least two years. Online lenders offer more flexibility to newer LLCs. For example, OnDeck’s term loan requires 12 months in business, while Fundbox’s business line of credit is available to businesses that have been in operation for just 3 months.

• Annual revenue. Lenders might require you to meet a minimum annual revenue threshold to show the strength of your business finances. Banks will likely ask you to meet higher minimums, whereas alternative lenders may be more flexible. If you are a new LLC that doesn’t have established finances, you may need to opt for financing options that rely on your personal credit instead of business revenue, like a personal loan for business or business credit card.

» MORE: Compare the best startup business loans

2. Determine the right type of LLC loan

Every business’s funding goals are different. You should think about what type of loan you want and can qualify for, how much funding you need and how fast you need it.

Here are some of the most common types of LLC loans:

You should also evaluate how much debt you can afford. A business loan calculator can help you estimate interest costs and monthly payments. You don’t want to take out a new loan if you won’t be able to pay it back.

3. Compare LLC loan lenders

Once you have an understanding of your funding needs and qualifications, you can begin researching different small-business lenders.

In general, banks and credit unions offer the best rates and terms, but come with more stringent qualification requirements. Online lenders are faster to fund and offer more flexible eligibility criteria. They usually come with higher borrowing costs than traditional lenders, however, especially if you have poor credit.

Compare several options — considering factors such as interest rates, repayment terms, funding speed and loan amounts — to decide which lenders are best for your LLC.

It can also be helpful to read customer reviews to get a sense of a potential lender’s credibility and reputation. Be wary of any companies that promise “guaranteed approval” or “no credit check,” as these may be predatory lenders looking to take advantage of businesses that are having trouble qualifying for other types of financing.

4. Gather necessary LLC loan documentation

Most lenders will require you to provide some, if not all, of the following as part of your LLC loan application:

• Personal information about you and any other members of your LLC.

• Basic business information and paperwork, such as your employer identification number, LLC articles of organization and business license.

• Business plan.

• Personal and business bank statements.

• Personal and business tax returns.

• Business financial statements (e.g., profit and loss statement, balance sheet).

• Collateral information, if applicable.

5. Apply for your LLC loan

After collecting all the necessary paperwork, you’ll complete and submit your application. Online lenders will allow you to apply online and may give you the option to digitally connect your financial accounts in lieu of uploading the required documentation.

Although some bank and SBA lenders may offer an online application process, others may require you to visit a bank branch to apply in person.

6. Review your LLC loan agreement and receive funds

Online lenders may be able to approve and fund your application in as little as 24 hours. Bank and SBA loans, on the other hand, may take anywhere from a few weeks to a few months to fund.

In any case, before signing a business loan agreement, make sure you thoroughly review the terms and conditions and reach out to your lender if you have any questions or concerns.

After you’ve signed the agreement, your lender will release your funds.

» MORE: How to get a business loan

Alternatives to LLC loans

If you don’t think you can qualify for an LLC business loan — or simply want to explore other financing solutions — here are a few to consider:

• Small-business grants. Grants offer a free form of financing that doesn’t need to be repaid. Although it can be time-consuming to search and apply for small-business grants, they can be an ideal option if you can secure them.

• Personal loans. New LLCs or single-member LLCs with strong credit may consider a personal loan for their business. These flexible loans can offer affordable rates, but will put your personal credit at risk if you can’t pay.

• Business credit cards. Although you never want to exclusively rely on a business credit card for financing, these products can be useful for funding everyday purchases. Credit cards with a 0% intro APR period can be a particularly good option for startups, as long as you don’t build up too much debt that you can’t repay.

• Crowdfunding. Similar to a business grant, crowdfunding can be used to raise money for your business without taking on additional debt. Crowdfunding can also be a way to promote your business and build a loyal customer base.

• Family and friends loans. Business loans from family and friends can be an alternative to an LLC loan. While there’s no formal loan application process for this type of loan, you still want to put the loan details in writing so there are no misunderstandings in the future.

Marianne Hayes, a freelance writer, contributed to this article.