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- LLC business loans are available from traditional lenders, online lenders or the SBA
- Some online lenders specialize in working with small businesses with bad credit or startups
- SBA loans offer a more affordable option but can be difficult to qualify for
If you’re starting up a limited liability company (LLC) or already own one, LLC loans can be a good way to find startup funds, stabilize cash flow, purchase large equipment or expand operations.
All types of small business lenders generally work with LLCs. You can find small business loans from traditional lenders, online lenders or the SBA. Read on to learn more about the pros and cons of each lender type and which one might offer the best LLC loans for your situation.
LLC loans from traditional lenders
Traditional lenders include banks and credit unions. Approval can be a challenge. According to the Federal Reserve’s 2023 Report on Employer Firms, big banks approved 68 percent of financing applications for loans, lines of credit and cash advances in 2022.
Traditional lender pros
- You’ll often have an office right up the road, which can be a pro for many people. Some 43.5 percent of people used mobile banking services in 2021, which means that over half of people still don’t use mobile services.
- Traditional lenders typically offer lower starting interest rates than alternative and online options.
- With timely repayments, you can build business credit and qualify for better rates. Some banks even offer free business credit score monitoring.
Traditional lender cons
- It’s harder to secure a loan. Even credit unions had a 65 percent approval rate for small business loans in 2022.
- 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 lenders for LLC loans. Banks and credit unions often require at least two years in business, minimum annual revenue requirements often top $100,000, and you’ll likely need a credit score in the good range. Some traditional lenders do offer lower qualification requirements, though you’ll likely have to secure your loan with collateral.
LLC loans from online lenders
These 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.
- 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
- People who prefer working with someone in person may not like this option.
- Most online lenders aren’t household names. You’ll have to do some digging to research lenders’ legitimacy and reputation.
- Rates typically start higher and can top 60 percent, especially if you have weak credit.
Who it’s best for
Startups that need easier approval or businesses that need fast funds.
SBA LLC loans
The U.S. Small Business Administration guarantees 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. You can find out more about SBA loans in our guide.
SBA loan pros
- 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.
- There are fast funding options, like the Export Express program, which responds to applications within 24 hours. SBA Express loans promise approval decisions within 36 hours.
- The SBA also offers loan programs that are more accessible to business owners with bad credit and underserved communities.
SBA loan cons
- Requirements are stringent. For example, you have to have invested equity in the company and exhausted other funding options.
- 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.
Where’s the best place to get an LLC loan?
To find the best 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.
The bottom line
You can get an LLC small business loan from a variety of lenders including traditional lenders, credit unions, online lenders, nonprofits and community development companies. LLC loan requirements and processing times vary based on the lender and the loan program so it’s a good idea to shop around and find an option that suits your unique needs. If you want to know more about getting an LLC loan, take a look at our guide.
Frequently asked questions
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.
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.
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.