Can I Get a Business Loan with an LLC?

What are your financing options as an LLC? This is a question that causes confusion for many business owners every year. Don’t worry, we’re going to take you through some of the most popular options. While you might think that traditional bank loans are your only option, you’re actually missing out on a whole world of LLC alternative financing. However, we’re getting ahead of ourselves!

Pros and Cons of an LLC

Short for ‘limited liability company’, an LLC is a type of business structure that some form when starting or growing a business. The main difference between an LLC and a sole proprietorship or partnership is that an LLC exists as a separate entity to all business owners. Therefore, all assets and liabilities belong to the company rather than an individual or partnership.

While some LLCs have one owner, others have several (and each is known as a member). One of the biggest reasons why business owners form an LLC is that they want to protect all members. If the business runs into money difficulties, no bank or organization can take personal assets. Furthermore, the registration process is simple in most states, and it avoids the issue of double taxation.

On the other hand, there’s often a problem with leadership roles. If you’re to choose this model, you’ll need to define all leadership roles carefully at the start. Also, there’s a requirement to renew each year with the state, and a member leaving can lead to dissolution. This being said, all these challenges are simple to overcome. The issue that isn’t so easy to overcome is fund-raising.

Why Do LLCs Need Funds?

In truth, the reason you’re on this article could be for any number of reasons. While some LLCs just need some help with the cash flow, others want to invest in the following:

• Buying a commercial premises
• Expanding
• Remodeling
• New machinery
• New staff
• Marketing

Can I Get an LLC Business Loan?

Not only can you probably get a business loan, but the options are more expansive than you realize. The South Florida Funding Group helps businesses each year to get the funding they need whether this is through an LLC merchant cash advance, LLC business line of credit, LLC invoice financing, or another form of LLC alternative financing. If you thought that you were restricted to traditional bank loans, think again. Let’s explore some of your options!

LLC Bank Loan

Since it’s one of the most common options, let’s address bank loans first. Bank loans are often in demand because the repayment periods are generous (as are the interest rates!). What’s more, it’s generally accepted that the bank is the place to go for a business loan.

The problem? Well, there are a few. Firstly, the extended application and approval process is simply too slow for some LLCs. If you need quick cash to overcome cash flow problems or expand to meet demand, the sad truth is that a bank loan application may be too cumbersome. Secondly, we cannot ignore the difficult qualification process. To get your hands on a bank loan, you will need to go through lots of checks while also completing endless amounts of paperwork.

If you’re to go through the rigorous application process for a bank loan, it’s best implemented for large business changes such as the purchase of real estate or expansion. If you need fast cash for cash flow, inventory, and smaller expenses, bank loans aren’t necessarily the best choice.

LLC Business Line of Credit

We’ve mentioned cash flow and inventory a couple of times, so it makes sense to suggest an LLC business line of credit next. Essentially, this works in much the same way as a personal credit card. After the line of credit is granted, you can dip into the funds whenever you need. So long as you repay the amount when due, you won’t need to deal with high interest rates. Depending on your needs and application, the amount extended to you can start at $10,000 and reach around $1 million.

If you take an LLC business loan, you’ll pay interest on the amount from the first day (even if you haven’t spent anything!). With a line of credit, you only pay interest on what you borrow. With the balance paid on a line of credit, you won’t pay anything until you borrow again. This is a great way to access flexible funds whenever you need them (in emergencies, in particular!).

LLC SBA Loan

Next, we have something more akin to a bank loan because you will receive an amount of money to spend on your business. This time, however, the Small Business Administration guarantees a large chunk of the money. With risk reduced for the lender, you’re now a more attractive proposition. Using the 504 and 7(a) programs, many businesses enjoy favorable terms.

Once again, qualification proves a stumbling block for many businesses (especially if you don’t have a long history of successfully repaying loans). The application process has improved with modern technology, but it’s still much longer than many other methods available with the South Florida Funding Group.

LLC Invoice Financing or Factoring

Do you have lots of outstanding invoices? If this is the case, you can sell these to certain lenders and receive funding for your business. Although all lenders are different, most will pay a maximum of 85% for these invoices. Then, when the customer finally pays, the lender receives the full amount.

While you lose a small percentage of your invoices, this is a clever way to free up some cash rather than endlessly waiting for customers who won’t pay. You can cash in on your outstanding invoices and generate funds for an emergency. LLC invoice financing suits seasonal businesses but be aware of the terms of the agreement before signing any official documentation.

LLC Merchant Cash Advance

This is like invoice factoring, but you’ll repay the lender through a percentage of all future sales rather than previous sales. For example, the lender will provide you with a lump sum of money. From here, they take a small percentage of all debit and credit card transactions as repayment.

Since this is an alternative method of financing, it cannot compete with bank loans in terms of interest rates. Yet, the application process is fast, and it suits seasonal businesses and others who know that good times are just around the corner. Often, it fixes short-term cash flow problems.

LLC Secured and Unsecured Business Loans

If you chose this route, you could access an LLC business loan whether through creditworthiness or assets. With an unsecured business loan, the creditworthiness of the owners will be important for security. As you can imagine, lenders want to know that you can repay the loan. Alternatively, a secured business loan secures the amount against a business-owned asset.

With the right provider, you could get approval within one day and then funding in the same week. This being said, you will need to meet certain requirements, such as up to six months in business. Fortunately, the application form is just one page and it’s much easier than SBA and bank loans in this regard.

Choosing an LLC Business Loan

Do you choose an LLC merchant cash advance, an LLC business line of credit, or another form of LLC alternative financing? Before anything else, ask some important questions because it could point you in the direction of one route.

• What is your business type?
• What do you need funds for?
• How much do you need?
• What is the financial future of the company?
• Do you have lots of outstanding invoices?
• Do you expect lots of sales in the near future?

By answering these questions, you should soon learn the best option for your financial position. While this will be LLC invoice financing for some, it could mean another form of LLC alternative financing for others.

Before making any big decisions, we recommend speaking to the financial professionals at the South Florida Funding Group. With access to various funding programs, it could be that you pursue a route that you hadn’t even considered. Rather than waiting months for a bank loan or choosing a route that would harm your long-term financing, choose the alternative financing that works for your business.

One option that we haven’t even considered is equipment financing and leasing. If you’re looking to purchase equipment, you can either lease the equipment from the supplier or finance it (you become the owner, but you pay the amount over a period of years rather than having to find the money upfront). For those who choose equipment financing, you will own the equipment once all the monthly payments are met. If you fail to make payments, the lender will simply take the equipment back.

Can you get a business loan with an LLC? Yes, and don’t just assume that you’re limited to a bank loan. As you can see, lots of options exist!