Where can I get an LLC loan?

As a limited liability company (LLC) business owner, you know the importance of capital like startup funds, steady cash flow and other expenditures that help your business thrive. Sometimes, cash on hand is limited. That’s where an LLC loan can be an invaluable asset to your success.

There is no shortage of lenders willing to extend financing to small businesses, but where you get your LLC loan matters when it comes to costs, funding time and other important details.

LLC loans from traditional banks

Traditional banks, both big and small, are common small business lenders. According to the Federal Reserve Banks’ 2023 Small Business Credit Survey, big banks approved 66 percent of financing applications for loans, lines of credit and cash advances in 2023 compared with 75 percent of small banks.

Traditional bank pros

• Physical location: You’ll often have an office right up the road, which can be a pro for many people.
• Lower rates: Traditional banks typically offer lower starting interest rates than many other alternative and online options.
• Lower rates over time: With timely repayments, you can build business credit and qualify for better rates. Some banks even offer free business credit score monitoring.

Traditional bank cons

• Strict requirements: It’s harder to secure a loan. Traditional banks tend to have strict requirements to be eligible, and they may not approve businesses without a strong financial profile. About half, or 51 percent, of applicants were fully approved for the amount of financing they applied for.
• Extensive documentation: Documentation requirements are often detailed and extensive. You can learn more about which small business documents you’ll need in our guide.

Who it’s best for

More established businesses may want to look into traditional banks for an LLC loan. Banks often require at least two years in business, minimum annual revenue requirements often top $100,000, and you’ll likely need a credit score of 680 or higher to qualify. Some traditional banks do offer lower qualification requirements, though you’ll likely have to secure your loan with collateral.

LLC loans from credit unions

Credit unions are member-based institutions that are not-for-profit. Membership requirements depend on the institution, but you may find lower interest rates and fees than you will with traditional banks.

Credit union pros

• Lower rates: Credit unions tend to offer lower rates than traditional banks or online lenders.
• Lower fees: Credit union fees are usually lower than traditional banks and online lenders.
• Member-owned: Credit unions are member-owned, which means that as a member, you are a partial owner.

Credit union cons

• Membership required: You must be a member to get a loan from a credit union. Membership requirements vary by credit union.
• Smaller loan amounts: Tend to offer smaller loans than a traditional bank.

Who its best for

Small business owners who are seeking smaller loan amounts, lower rates and lower fees and don’t mind satisfying membership requirements may be best suited to get their loan from a credit union. Similar to banks, credit unions often require annual revenue of at least $100,000 and a minimum credit score of 680.

LLC loans from online lenders

Online lenders offering LLC loans include banks that have online lending programs, peer-to-peer lending platforms and financial service companies, many of which specialize in lending to small businesses or startups that could not receive funding from traditional banks.

Online lender pros

• Approval is often easier: Some online lenders specialize in working with startups and have fewer requirements.
• Fast funding: Online lenders often focus on speed, advertising same-day approval and fast funds. Traditional lenders can take weeks to months to approve and send funds.

Online lender cons

• No in-person contact: People who prefer working with someone in person may not like this option.
• Lack of reputation: Most online lenders aren’t household names. You’ll have to do some digging to research lenders’ legitimacy and reputation.
• Higher rates: Rates typically start higher and can top 60 percent, especially if you have weak credit.

Who it’s best for

You may consider applying for an LLC loan with an online lender if you’re a startup or a business needing an easier approval process or fast funds. Online lenders often lower the barrier to entry. They may accept businesses with six months in business, $100,000 in annual revenue or lower and credit scores in the 500 to 600 range. For fast funding, many online lenders can fund loans as quickly as 24 to 48 hours.

SBA LLC loans

The U.S. Small Business Administration offers several types of small business loans. You don’t apply directly to the SBA, as traditional and online lenders distribute the loans. These loans come with capped interest rates and long repayment periods.

SBA loan pros

• Loan variety: The SBA offers a wide variety of loans for different uses, including the general purpose 7(a) loans for working capital, 504 loans for real estate, and microloans.
• Fast funding: There are fast funding options, like working with an SBA Preferred Lender or getting an SBA Express loan, which doesn’t require direct SBA approval.
• Loan accessibility: The SBA also offers loan programs that are more accessible to business owners with bad credit and underserved communities.

SBA loan cons

• Strict requirements: Requirements are stringent. For example, you have to invest equity in the company and exhaust other funding options.
• Lengthy approval times: Approval times are often lengthy — it can take up to 90 days to receive a response, especially if you’re working with a non-preferred lender.

Where to get SBA loans

You don’t apply directly to the Small Business Administration (SBA) to get a business loan for a new LLC. Instead, the SBA backs loans that are provided by various lenders such as banks, credit unions and alternative lenders, including online lenders. Some SBA loans are also offered by nonprofits, community development financial institutions (CDFIs) and community development companies (CDCs).

Typically, online lenders, credit unions and banks at the national, regional and local level offer 7(a) and 504 loans. The 7(a) loan is the most common SBA loan program and can be used for nearly any purpose, including working capital, payroll, expansion and equipment. The SBA 504 loan is a type of funding designed for buying large assets such as commercial equipment or real estate. It’s available through CDCs, which partner with lenders.

SBA microloans are generally available through non-profit organizations that have received the approval of the SBA.

Who it’s best for

Thanks to their capped rates, SBA loans are a great option for any borrower who can wait out the long funding process — just look for a lender with requirements your business matches.

How to get an LLC loan

To find the best LLC loan for you:

1. Assess your credit score, annual revenue requirements and time in business to see where you’d qualify.

2. Decide if you want an in-person or online experience.

3. Decide what type of loan you need.

4. Amass a list of lenders that are either online or in-person.

5. Compare eligibility requirements and loan features.

What documents are required when applying for an LLC loan?

The documents required for an LLC loan will vary by lender. But in general, you can expect to provide:

• Personal identification
• Social security number
• Business tax ID
• Business licenses and permits
• Articles of organization
• Business debt schedule
• Outstanding invoices
• Personal and business bank statements
• Personal and business tax returns
• Tax payment receipts
• Profit and loss statements

Bottom line

As an LLC, you have several options for small business loan lenders, including traditional banks, credit unions, online lenders and the SBA. Shopping around among different lenders is vital, as each type of lender is a bit different. Comparing options helps to ensure you’ll get the best deal for your business’s needs. To learn more about getting an LLC loan, take a look at our guide.

Frequently asked questions

• Does an LLC have its own credit score?

  Yes, businesses have their own credit score and profile that is independent of your personal credit score. Business credit bureaus like Dun & Bradstreet and Equifax track business credit reports and scores. You can build your LLC’s credit profile by obtaining credit. This could come from applying for credit lines, business credit cards or business loans and maintaining a positive credit history with on-time payments and low debt.

• Does LLC debt affect personal credit scores?

  In general, LLC debt will not impact your personal credit profile or score. But if you opt to personally guarantee a loan taken for the LLC or cosign a loan, that can impact your credit score if loan payments are not made on time or the loan is defaulted on entirely. Plus, if you guarantee a loan and the loan goes into default, your personal credit score could be impacted for years. If you put up any assets as collateral, they could be seized by the lender to recoup their loss.

• Can you start an LLC with bad credit?

  Yes, you can start an LLC, no matter what your credit score is. But, it will be far more difficult to obtain loans or other forms of credit when you have a poor credit score. If you do get approved for a business loan for bad credit, you’ll also have to deal with high interest rates and fees.