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By: rkapur
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The Best LLC Loans: 6 Financing Options For Limited Liability Companies

Most likely, LLC loans are on top of your mind if you have a Limited Liability Company. But are loans for Limited Liability Companies as readily available as loans for other types of small businesses?
 
In this post, we’ll give you the top LLC loan options and provide you with some more information that you may find helpful.
Get A Loan For Your LLC!

business owner shaking hands with lender

6 Types of LLC Business Loans

Let’s dive right into it. Here are six types of LLC credit:

1. Small Business Loans

This is a pretty broad term, but when you talk about small business loans, the reference is usually to a form of business financing that has the following characteristics:

  • You will receive the loan amount issue as a lump sum.
  • If you borrow the money, you have to repay the loan along with interest in fixed installments.
  • Interest rates remain the same for the term of the loan.

Small business loans are available from banks, credit unions, other types of financial institutions, and online lenders.

#CaminoTip
Before you finalize your loan, it’s advisable to check the terms and conditions carefully. And don’t forget to read the fine print. Some LLC loans involve hidden costs that you may learn about only after you have taken the loan.

Use this business loan calculator to see how much a loan could cost you:

Term Loan Calculator


Fortunately, there are great alternatives with minimal LLC loan requirements and amicable terms. A Camino Financial small business loan could be your best option.

camino financial logo

We are a mission-driven company, and our motto—No Business Left Behind—ensures that we’ll do everything within our power to provide small business owners with the funds they need for their companies.

Camino Financial LLC loan rates

When you get a Camino Financial loan, you can be sure that you’re getting the best possible deal:

  • the loan size ranges from $5,000 to $400,000
  • you can choose repayment terms starting at 24 and up to 60 months
  • we offer fixed annual interest rates from 12% to 40%

A Camino Financial small business loan could be superior to a bank loan in many ways. For example, you’re eligible to apply even if you don’t have an SSN or Social Security Number. An ITIN is all you need.

Camino Financial is a California finance lender, loans are available for you, and you can apply for a business loan today! It takes just a few minutes, and applying will not affect your credit score.

Get Approved For A Loan Today

2. Bank Loan

A bank loan could be an excellent way to obtain LLC financing as some banks offer LLC loans at rates of interest that other lenders find difficult to match.

However, these LLC loans have downsides.

A bank may not be the best place to obtain LLC business loans, especially if you’re in a hurry. Most banks have lengthy and cumbersome application processes. It may be weeks before you hear from them.

Additionally, some banks still require you to submit paper documents and go to a branch.

There’s another problem that you could face with mainstream banks. The borrower may need to have an excellent credit score. If you don’t meet this condition, it could be a waste of time to apply (or you could end up with very high LLC loan rates).

#CaminoTip
A bank may not be the best place to look for LLC loans, especially if you need money quickly or you have a less than perfect credit score.

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3. SBA Loan

The U.S. Small Business Administration or SBA is a government agency with the primary function of supporting the country’s entrepreneurs. One way it does this is by helping them access the capital they need.

SBA loans are the cheapest LLC loans by far.

The most popular SBA loans are the SBA 7(a) loans and the CDC/504 loan program.

A company can use SBA 7(a) loans for their working capital needs and a range of other business purposes. You can use the money from a 7(a) loan to boost your cash flow, purchase equipment, or even refinance existing debt under certain conditions.

The CDC/504 loan program provides long-term fixed-rate funding for buying fixed assets.

The 7(a) loan and the CDC/504 loan program have an upper limit of $5 million. Interest rates vary, but the 7(a) is usually available at an annual rate of 5 to 11 percent, while the 504 loans cost significantly less than that.

On the downside, SBA loans are hard to qualify for. And it can sometimes take months to get your loan approved.

They may not be a good option when you are looking for LLC business loans.

4. Invoice Factoring

This is a good way to raise money against your unpaid invoices.

Invoice factoring, also known as credit factoring, involves selling your accounts receivable to a lender.

An added advantage this method of borrowing provides is that the lender is responsible for collecting the invoices on your behalf. So, that’s one less headache for business owners.

If you’re looking for a small business loan for a new LLC, invoice factoring might be a perfect fit.

Invoice factoring companies advance funds based on the creditworthiness of the company that has bought the goods. Consequently, the credit check that they carry out doesn’t focus on the borrower. For new LLCs, this can be a boon.

Invoice factoring is one of the more expensive LLC loans, though. APRs can be 20 percent or higher. But it’s a quick and easy way to raise money if you’re struggling with the issue of LLC credit.

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5. Line of Credit

A business line of credit is an ideal solution if you’re looking for a flexible form of LLC lending.

The borrower doesn’t receive funds in a lump sum. You can draw upon a line of credit when you need it with the LLC loans in this category.

You save on costs as you pay interest only on the sum you borrow.

If you don’t need money all at once, a line of credit is an excellent option. The fact that you can draw funds only when you need them makes these types of LLC business loans a great alternative.

But remember, a line of credit can be expensive.

Annual interest costs could be north of 25 percent.

6. Merchant Cash Advance

A merchant cash advance is another type of commercial loan for an LLC. And while it is very popular, it might not be a good option. Let’s see why.

A merchant cash advance is something like invoice factoring. But instead of raising money against your invoices, you get an advance on your future credit card sales.

Businesses with significant volumes of credit card sales can find it easy to secure this form of financing.

Many business owners see them as great alternatives because they are easy to qualify for. Lenders don’t usually look at your tax returns or credit score when you apply. If so, why are they not a good way of financing your LLC?

Merchant cash advances aren’t cheap, though. In fact, they’re downright expensive.

Interest rates can be in the region of 40 to 150 percent or even higher.

hand offering money from llc loans

What is a Limited Liability Company (LLC)?

Business owners limit their personal liability by forming a legal entity called a Limited Liability Company or LLC. 

You can take on business debt without being personally responsible should someone file a lawsuit against your company. Creditors can’t come after your personal assets such as your home, vehicles, and checking accounts. 

Setting up an LLC costs less than forming a corporation but more when operating your business as a sole proprietorship or a partnership. Once you file the appropriate LLC organizational documents with your county/city and state, you can legally operate your business in very little time.

Why do LLCs Need Business Financing?

There are many reasons why you, as the owner of an LLC, might apply for a loan:

  • You might use loan proceeds to market a line of new products and services or consolidate debt to reduce the total interest paid. 
  • An opportunity may come up to purchase real estate or to rent warehouse space. 
  • You can always get business financing to improve your cash flow or to increase your inventory on hand.
  • Having extra cash means you can upgrade equipment, invest in employee benefits or purchase new furniture.
  • You can use business loan funds to pay operational expenses such as accounts payable, supplies or renovate or construct a building.

Most Common Qualifications for LLC Loans

The six LLC loans we’ve listed in this post have different requirements.

An SBA loan or a business loan from a bank may be available only if you have a high credit score and excellent financials.

On the other hand, it’s easy to qualify for a business loan from an online lender.

Here is a list of the basic qualifications that most lenders will look for:

  • How long has your business been in operation? Most lenders will require you to have been in operation for at least 1 or 2 years.
  • What are the monthly sales? Some lenders may require up to $10,000 in monthly gross sales.
  • What’s your FICO score? Most lenders won’t approve your loan if you have a bad credit score or if you don’t have a previous credit history.
  • Be prepared to find lenders that will ask you to pledge collateral
  • Mont likely, you will need to have an SSN to receive a loan approval

Of course, each lender will have other requirements, as well. They will ask you to provide details about your company bank accounts and maybe even a copy of your LLC Operating Agreement.

Financial Documents for an LLC Loan

To qualify for a business loan for your LLC, you need to provide copies of the last two years of your business tax returns and bank statements. In addition, lenders will pull your credit report to review your financial history and verify your personal and business credit scores. 

Lenders need copies of your current balance sheet and income statements to determine your debt-to-income ratio.  Likewise, a list of your aging accounts receivables and payables also gives the lender a picture of your business’s cash flow and financial health.

At Camino Financial, we’ll only review the last 6 months of your cash flows. Even better yet, the process is completely paperless because we use a tool called Plaid

Business Documents for an LLC Loan

Lenders need copies of documents such as articles of incorporation and your business license. Plus, a well-written business plan provides an overview of your business goals and objectives detailing how you plan to run your business. 

Also, an operating agreement shows how you manage specific departments such as customer service or marketing.

Lenders may ask the primary business owner to submit a resume listing management and business experience or for copies of commercial leases and rental agreements. 

In addition, a certificate of good standing will demonstrate that the business is legal and is current on reports and fees with the Secretary of State.

At Camino Financial, the lending process is straightforward, and we don’t require as many documents nr a business plan.

Camino Financial’s LLC Loan Requirements

Camino Financial has minimal requirements, which make it easier to apply for a small business

  • Only nine months in business
  • $2,500 in monthly gross sales
  • You can apply even if you don’t have a credit history
  • We don’t require collateral
  • You can apply with an ITIN
Apply For A Loan With Minimal Requirements!

How do I Fund my LLC? 4 Steps to Get an LLC Loan

Here’s the step-by-step procedure you can follow to get an LLC loan:

1. Find the best type of loan for your LLC

First, figure out what you need the money for and how much you need.

If you require funds for buying machinery, a long-term business loan could be a good option. But if you need the cash to make smaller purchases, a line of credit may be a better idea.

2. Select a lender

Make a list of lenders that you plan to approach. Then check if you can meet their requirements. For example, is your credit score good enough? Or, are your monthly sales more than the threshold specified by the lender?

3. Apply

Once that you zero in on the best financial product and lender, collect your documents and submit your loan application.

If you apply with an online lender, you will be able to present your application anytime, anywhere, without having to collect any paper documents.

#CaminoTip
When you receive the loan, make sure that you use the money in your business. Don’t make the mistake of diverting the funds for personal expenses. / Commingling is when you mix personal and business finances, and it’s a dangerous practice.

How Much Does Your LLC Needs to Borrow

By taking a close look at your past revenue and expenses, you can determine how much money to borrow. 

Review your profit and loss and cash flow statements for the past year. Then, project your future costs based on how your business trends financially. 

You can project increased revenue based on how you will use the loan proceeds to expand business growth and increase sales.

Another way to determine how much money to borrow is to assess your debt to income ratio (DTI). 

Compare your income and expenses to determine how much money you can safely invest toward paying off debt. Make sure to add in associated costs to take out the business loan, such as closing costs and the total interest the lender charges.

Uppermost in importance is to apply for a loan amount you can repay while growing your business simultaneously.

Additionally, it’s a wise business decision to get a smaller loan now to build your credit history, so you qualify for a larger loan later. 

smiling business owner

Get Loans for LLCs from the Best Lender

As you’ve seen, there are plenty of options when you’re looking for LLC loans.

The important thing is to identify a lender that understands your requirements and has the expertise to provide you with a loan that’s best suited to your needs.

At Camino Financial, our motto is No Business Left Behind, and our loan specialists will do all they can to arrive at the best financing solution for your company.

We invite you to apply for a business loan and become part of the Camino Financial family.

Apply now!

 

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FAQs About LLC Loans

How to set up an LLC?

At some point, many business owners opt to convert their sole proprietorship into an LLC.

Setting up an LLC involves following the rules laid down by your state’s Secretary of State. You can even do it from home by using LegalZoom, an online platform that provides this service to business owners.

Learn more about how to set up an LLC

Can an LLC borrow money from a bank?

Yes, an LLC can get loans from a bank as long as it meets the requirements that the bank specifies.

Does an LLC have a credit score?

Yes. Your business credit score is your LLC’s credit score.

But you should be aware that lenders may also ask to see your personal credit score before approving a loan to your company.

Can I get a business loan as an LLC?

Of course, you can!

Remember that an LLC is a business structure that protects the owner’s personal assets from the company’s creditors and also provides some tax benefits. So, you can borrow money just as any other business can.

At Camino Financial, we’ll be happy to help you fund all your business needs.

Are there LLC startup loans?

Yes!

Actually, Camino Financial has a great product, the Solopreneur Loan, that is perfect for startups and even for people that are just planning on opening a business.

 

Check if you
qualify for a loan

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