Where can I get an LLC loan?

sturti/Getty Images: Illustration by Issiah Davis/Bankrate

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 LLC lenders include banks and credit unions. Approval can be a challenge. 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.

Traditional lender pros

• You’ll often have an office right up the road, which can be a pro for many people.
• 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. Traditional banks tend to have strict requirements to be eligible, and they may not approve businesses without a strong financial profile. Even credit unions had a 75 percent approval rate for small business loans, according to the 2023 Small Business Credit Survey.
• 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 an LLC loan. 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 of 670 or higher to qualify. Some traditional lenders do offer lower qualification requirements, though you’ll likely have to secure your loan with collateral.

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.
• 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

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 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. 

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 working with an SBA Preferred Lender or getting an SBA Express loan, which doesn’t require direct SBA approval.
• 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.

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.

Bottom line

You can get a business loan for an LLC 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

• 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.