How To Get An LLC Business Loan? Free Guide 2023

Taking out a business loan could be just what your LLC needs to take the next step forward. But finding the right LLC loans and qualifying for them can be difficult, which is why we’ve created this guide. It covers everything small business owners need to know about procuring an LLC loan so they can execute their business plan. Keep reading to learn more.

What is an LLC?

A limited liability company (LLC) is a type of business entity. It’s one way a business owner can run a company and an alternative to sole proprietorships and corporations. You need to file forms and pay fees to form an LLC, so if you haven’t done that yet, you may need to do so before you begin looking for LLC loans. We have many online guides you can use to find state-specific instructions for forming an LLC.

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Different Type Business Loan for an LLC?

First, let’s take a look at the different types of business loans that you may qualify for as an LLC owner. Here are six LLC loans to consider.

Bank Loans

First, you can apply for a loan from traditional banks. This a standard bank loan that’s very similar to a personal loan, except it will be based on your company’s financial health in addition to your own personal finances. You may need to provide business bank statements and personal income statements to traditional banks when applying for this loan.

SBA Loans

You may also qualify for SBA loans. These are backed by the Small Business Administration of the federal government. SBA loans are often easier to qualify for because they’re backed by the government and so banks have to take on less risk when offering them. But taking out an SBA loan comes with its own requirements, which you can review online.

Unsecured Loans

You may also want to look into unsecured LLC loans. An unsecured loan is one that isn’t backed by a specific business or personal asset. You typically need a higher credit score and more business history to qualify for an unsecured loan with an LLC. But it’s an advantageous type of LLC financing in some cases because you don’t have to risk your valuable personal or business assets for this term loan.

Invoice Factoring

You can also look into invoice factoring. This involves getting paid upfront for outstanding invoices that customers haven’t yet paid. Invoice factoring typically just takes a portion of the invoice amount, but it can be helpful if you want to get paid right away instead of waiting for your customers to pay your limited liability company.

Line of Credit

Another option is opening up a business line of credit. Business lines of credit function similarly to a personal credit line in that they are revolving accounts you can use on an as-needed basis. Opening up a line of credit can give you an ongoing source of extra funding from online lenders instead of a one-time cash influx.

Merchant Cash Advance

Finally, you can also look at procuring a merchant cash advance as a form of business financing. This business loan option is based on the revenue your LLC generates. It may be a good option if you don’t think you have a good enough personal credit score or business credit score to qualify for a standard secured loan from an online lender.

What Do You Need to Apply for an LLC Business Loan?

Now that we know the types of traditional business loans and LLC business financing that are available, let’s look at how to apply for them. Here’s what you’ll typically need to show online lenders to get a business loan.

Financial & Business Documents

First, small business lenders typically require a variety of business and financial documents to begin the application process for a lump sum loan. This will likely mean sharing information about your revenue – both this year and historically. 

You may need to provide credit unions with personal financial documents to get a business loan from credit unions or a traditional business loan. This can include a list of your personal assets if a personal guarantee is necessary and will likely involve looking at your personal credit history.

If you don’t think you have the personal credit score necessary to provide3 a personal guarantee for LLC loans, consider working with alternative lenders. For example, you could look at invoice factoring and merchant cash advances instead of an SBA loan or traditional small business loans.

Official LLC Documents

Whether you want an SBA loan, traditional small business loans or alternative lending, you will need to show your official LLC documents to get it. This proves that you are the business owner that you say you are and shows private lenders or a factoring company that you operate a valid business with all necessary business licenses.

Business Credit Score

Some business loans have credit score requirements in the application process. For example, you may need to have a business credit score when opening a line of credit or choosing a term loan with competitive interest rates.

The loan terms you receive after the application process on term loans, such as your interest rates and loan amount, can vary based on this credit score. Just remember that business credit scores are only one way to procure a loan. You may be able to borrow money without one if you can show solid cash flow or profit and loss statements.

Transaction History

Finally, you may also be required to show transaction history during the application process. This can indicate what you plan on dining with the loan proceeds and prove that the financial assistance you want will be put to good use if you’re approved for an alternative loan with an LLC or traditional small business loan.

Tips for Applying for Business Loans for LLC

Now let’s take a closer look at the best strategies to use when applying for a loan with an LLC. Here are some tips to help you get your ideal loan amount on term loans or credit limit on a business line of credit.

Determine What You Need

A good first step is determining the amount of funding you need. This can help you zero in on the right type of term loan or line of credit.

You may also want to consider whether your needs are ongoing or a one-time event. For example, do you want ongoing cash flow support? Or are you looking at loan amounts that will allow you to make a one-time purchase of equipment? The answer can help you determine how to think about secured loans and loan amounts moving forward.

Consider Your Qualifications

Next, consider your qualifications. What is your company’s strongest attribute from the perspective of lenders? Does it have good revenue? Lots of outstanding invoices? Or a strong credit score? You may even have valuable business assets.

You want to apply for the loan type that you have the best chance of being accepted for with competitive interest rates. Knowing your qualifications and where they stand out can help you do this.

Compare Lenders

At this point, you should have a good sense of which type of loan is right for your LLC. Now you can start comparing lenders to see which will offer the best interest rates, minimum credit score requirement, and loan repayment terms.

You can typically compare several options online with pre-qualification that doesn’t impact your credit score. Many lenders will list things like their minimum credit score and interest rates online as well so you can review each lender’s website to learn more.

Gather Documentation in Advance

Now you’re ready to begin putting together all of the documentation that you will need to apply for the loan. As highlighted earlier in this article, that can vary based on the type of loan that you’re applying for. It can include:

• Profit and loss statements
• Business and personal credit scores
• Business and personal asset listings
• Transaction history
• Official LLC paperwork
• Business licenses
• Other paperwork

How to Get LLC Business Loans?

The best way to get LLC business loans is to figure out what type of loan you have the best chance of getting based on the financial strengths of you as an individual and your LLC as a business. The bottom line is that you need to give lenders a reason to trust that you will pay back whatever you borrow. You can provide that proof in the form of a strong minimum credit score, lots of assets that can be put up as collateral, or outstanding invoices for factoring loans.

The chances are high that you will be able to qualify for at least one type of LLC loan. You may just need to do some research and consult with lenders to figure out which option gives you the best chance of getting the funds you need.

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Final Thoughts

LLC loans can provide your company with the financing it needs to grow, purchase equipment, or pay off high-interest debt. You may be able to qualify for one even if you have a new business or a poor credit score. The key is identifying which type of loan you have the best chance of approval for based on your personal and LLC financial strengths.

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