LLC Business Loans: 6 Ways to Finance a Limited Liability Company
When applying for business financing in the past, you may have unfortunately felt like the ‘least likely candidate’ – but that’s not what LLC stands for!
And while you’re a ‘lucky little creature’ for finding this article, that’s also not what LLC stands for (sorry to disappoint).
Getting curious? We’ll cut right to the chase.
Scroll down for a refresher course on what LLC business loans are, how to set one up, and – most importantly – the top LLC financing solutions out there for you.
What is a Limited Liability Company (LLC)?
A limited liability company (or LLC for short) is a way of structuring a business that maintains the tax structure of sole proprietorships and general partnerships, but adds the aspect of limited liability which is characteristic of corporations.
What does that really mean? Basically, the owners of an LLC are only obligated to pay taxes as individuals as opposed to paying taxes on profits and on individual returns the way corporate owners are required to do. It also means that if an LLC is sued, the owner is not held liable. Similarly to a corporation, an LLC will be answerable to any charges and will face the consequences of any legal action – not the owners of the LLC.
But the grass isn’t entirely greener on the LLC side. It’s important to consider all factors before deciding to form an LLC.
Here’s a short summary of the pros and cons of a limited liability company:
- Less paperwork to fill than corporations
- More flexible tax options to pick from than other business structures
- Accessibility to certain tax writeoffs
- Limited liability that protects the business owners from legal repercussions the company might face
- Leadership roles are less clear, which can cause confusion for partners and investors
- Risk of dissolution if one of the partners leaves the company or deceases
- Self-employment taxes are mandatory, which can result in higher taxes than corporations
Still interested in forming an LLC now that you have some basic understanding of the ups and downs? Good! Keep reading to find out how to set up an LLC.
How to set up LLC business loans
The steps to setting up llc business loans will differ depending on the state you’re in. That said, below we’ve provided a quick summary of the basic requirements which will help you get prepared.
Step-by-step guide of how to set up an LLC:
- Pick a name for your LLC business loans
- Hire a registered agent. This is a third-party individual whose role is to receive legal documents on behalf of the LLC.
- Draw up an LLC Operating Agreement. This is a document that defines how the LLC will run, and what will happen if the business fails, if a partner dies, etc.
- Fill out forms. Those forms will vary state to state, but they’ll usually ask for basic information about the members of the LLC, their assets, their debts, and so on.
- Pay a filing fee. Typically this runs only a few hundred dollars, but there may be an annual fee or tax to maintain the LLC registration (depending on the state).
- Get certified. Once you’ve done that, you can continue with the other essential steps to set up an LLC. That includes opening a business bank account, getting a business license, and so on.
This is a very brief summarization of what it takes to get an LLC up-and-running, but as you can see, it can be costly just to get off the ground. If the expenses involved in starting an LLC are of concern for you, you’re not alone.
Consider boosting your cash flow with business loans for an LLC – that way you can breeze through the process of establishing an LLC without worrying about covering the costs.
Why do LLCs need business financing?
Besides the funds you’ll need to get your LLC set up, there will also be numerous expenses involved in maintaining and, of course, scaling up your business. Needless to say, the costs of running a business vary depending on the age of your business, the industry you’re in, where you’re located, and so on.
The ongoing costs of operating an LLC include:
- Paying for insurance
- Hiring new talent (read more about the US labor shortage)
- Revamping the workplace
- Surviving slow seasons
- Marketing your business
- Re-branding your business
- Replacing or repairing equipment
- Building a cybersecurity plan
The list goes on and on.
When it comes to the number and types of expenses your LLC will face, the only limit is your imagination (and ambition). If you find yourself wanting to take your LLC to the next level, or needing to make a change in order to keep the business alive, then additional funding can be the answer to your prayers.
Not sure which kind of business financing solution is right for your LLC? Keep reading to learn more about the funding options at your disposal (and available through Become’s online business lending marketplace).
6 Types of LLC Business Loans
1. LLC Bank Loan
Obtaining LLC business loans through your bank is often the first thought that comes to mind. And there’s a good reason. Banks can provide low interest rates and offer you face-to-face communication, among other things.
But there’s also a good reason why there are alternative business loans for an LLC. Banks also have quite strict requirements that need to be met in order to qualify for a business loan. And even if you do qualify, you’ll have lots of paperwork to fill out, and a long time to wait to actually receive the funds.
It’s due to those barriers in the traditional lending process that Become developed its unique online business lending marketplace. You can discover today exactly how your business can benefit with Become, whether you’re an LLC or not!
2. LLC SBA Loan
SBA loans are generally regarded as the top tier of LLC business loans. That’s because they’re backed with a signed guarantee by the U.S. government, which significantly reduces the risk taken on by the lender. That creates conditions where LLCs can get some of the absolute best interest rates, loan amounts, loan repayment terms, and so on.
Since they’re so desirable and have such high demand, SBA loans for LLC also have tougher qualification criteria when compared with other types of LLC business loans.
Top Pro: Low monthly payments
Top Con: Not for startups
Credit Score: 600+
Loan Term: Up to 10 years
3. LLC Unsecured Loan
Is your LLC short on valuable assets? Or, do you prefer not to put valuable assets down as security on loans for LLC? In either case, an unsecured business loan can be your ideal solution, since they don’t require any collateral to qualify.
Of course, the advantage of not needing to provide security comes with a tradeoff. Since the risk is higher on the lender’s part, the interest rates for unsecured business loans for LLC are usually higher than other forms of LLC financing.
Top Pro: No risk to personal assets
Top Con: Higher interest rates
Credit Score: 350+
Loan Term: 6-24 months
4. LLC Invoice Factoring
Learning to deal with slow or non-paying customers is absolutely necessary for any business, LLC or not. When friendly phone calls and pushy emails aren’t cutting it, then invoice factoring can truly come in handy.
The way it works is the lender pays you roughly 80% of the value of your unpaid invoices upfront and then provides the remainder once those payments have been collected (minus a service charge of 1-4%). Clearly, this is a great way to free-up cash that’s currently inaccessible to your business.
Top Pro: Access funds tied up from slow-paying customers
Top Con: Placing customer relationships in the hands of a third party
Credit Score: 530+
Loan Term: 1-13 weeks
5. LLC Line of Credit
A business line of credit works very similarly to a credit card in that you’ll be able to use the funds for essentially any business-related expense, and you’ll only need to pay interest on the funds you actually use. This is very different from other types of LLC financing, which typically provide funds in a lump sum.
With a business line of credit, the funds are there for when you need them, to be used however you feel is appropriate. This is a useful safety net to have in place at all times.
Top Pro: Use funds as-needed
Top Con: Penalties for late payments
Credit Score: 300+
Loan Term: Revolving lines available
6. LLC Merchant Cash Advance
Need a fast business loan? Plan on paying it back very quickly? Then consider applying for an MCA.
A merchant cash advance will provide you with a lump sum loan that gets repaid by automatically drawing a percentage out of your business’s future credit and debit card transactions, which is super helpful if you have a bad habit of forgetting to pay your bills!
Just be careful when taking out an MCA, because if you can’t or don’t pay it back quickly enough, you’ll feel the real impact of those higher interest rates. Generally speaking, MCAs are treated as a last resort when it comes to LLC financing.
Top Pro: Fast access to cash
Top Con: High interest rates
Credit Score: 500+
Loan Term: 2-10 months
How to apply for LLC business loans
Did you know that more than 25% of small business loan applicants complained about long wait times through their bank?
On top of that, 23% of those same applicants complained that the application process with banks was difficult.
And as if that wasn’t enough, only 58% of business loan applicants are approved by big banks (compared to 82% approved through online lenders).
At Become, we know and understand just how hard it can be for business owners to obtain the funding that they need or want. With the power of financial technology, and the mission to help small businesses face fairer funding odds, Become is revolutionizing the business lending process.
First, Become’s advanced technology gathers the information that lenders use to see if your business can qualify. Then, powerful algorithms automatically match you with the optimal lenders for your business’s specific needs. It’s really that simple. With Become, the time from application to funding can be as little as 24 hours!
You can find out which lenders your business qualifies with today by filling one quick and easy online application. It doesn’t cost a penny, won’t affect your credit score, and doesn’t obligate you to anything. And in the worst-case scenario, if you don’t get approved right away, you’ll get free access to a tailored LendingScore™ Dashboard where you’ll get unique insights into how you can improve your business’s funding odds.
Ready to get started?
Step-by-step guide for applying for LLC business loans:
- Choose your desired loan amount and select ‘Get Loan Offer’
- Fill in the requested information (including time in the industry, revenue, business, etc.)
- Submit your business’s checking account information for analysis
- Wait for offers. You can also review your status by clicking ‘Access Your Loan Application’
- Review offers and select your preferred lender
- Receive the funds to your business checking account
- Review your tailored LendingScore™ dashboard to improve your funding options
- Improve your rates – if your LendingScore™ is insufficient, follow the personalized plan (8-12 weeks to unlock funding)
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