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LLC Business Loans

How to Get an LLC Loan

LLCs are some of the most popular business formations in the US, accounting for 35% of all businesses. Like any business LLCs often need to look for additional funding to grow, and so it’s common to look for an LLC business loan.

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What is an LLC?

An LLC combines the ease of running a sole proprietorship with the crucial protection of limited liability. This means if a customer sues your business, your personal assets like your car or savings are safe. Plus, you enjoy pass-through taxation and flexible management options. It's simply a smart and popular way to protect yourself and your business.

What is an LLC loan?

LLCs are eligible for most types of business loans available to other business structures. This is because LLCs are the most popular business structure in the US, making them a natural fit for many lenders' loan programs. Additionally, the limited liability protection offered by LLCs can be attractive to lenders, potentially increasing their willingness to approve loans.

How does an LLC loan work?

This depends on the type of business loan you choose – many business loans work like a traditional loan, where you borrow a lump sum of money and pay it back over months or years with a steady monthly payment. Some have more flexible terms, where you can borrow money as and when you need it, and pay back what you like, provided it's above the minimum weekly, monthly, or quarterly payment.

Common uses of LLC loans

Common reasons why LLCs need financing are:

  • Buy new inventory
  • Fund a new marketing campaign
  • Invest in new equipment
  • Temporary staff and other staffing needs
  • Get bigger premises (either improvements or moving)
  • Invest in new software or processes
  • Pay for a consultant
  • Ease cash flow issues (common for new businesses that work with large contracts or wholesale)
  • To refinance existing debt

Can you get a business loan with an LLC?

Yes, an LLC is a popular business structure and one all lenders are familiar with. Whether or not you can get a business loan will depend on other factors, such as your revenue, creditworthiness, and time in business.

Best LLC Loans

OnDeck: best for LLC expansion needs

Credibility Capital

Credibility Capital

Funding: Borrow up to $500,000
Minimum Credit Score: 650
Best For: Term loans
Funding turnaround: Varies.

With Credibility Capital, borrowers with strong credit can obtain small business loans with attractive rates. A personal guarantee along with a business lien and revenue may be required to qualify. Note: This lender provides funding for all states except for North Dakota, Nevada, South Dakota, Vermont.

SBA (7a loan): best for LLCs that are not in a rush to obtain funding

SBA 7a

SBA 7(a) loan

Funding: Borrow up to $5,000,000
Minimum Credit Score: 650
Best For: SBA loans
Funding turnaround: Varies.

The SBA 7(a) program features lenders such as Wells Fargo in their network and provides capped interest rates and long repayment term flexibility. Term loans and lines of credit access available. Typically, collateral will be required with a personal guarantee. Funding times vary and may be longer than most other lenders.

What are the requirements for a business loan with an LLC?

Most business loans require:

  • 2-3 years trading history (this isn’t a hard and fast rule, but this will make attaining traditional loans easier)
  • A good business credit score
  • A good personal credit score (this is usually 600+, though varies)
  • Proof of strong revenue (maintained or growing)

Some business loans will also require you to put up collateral for the loan, which is an asset (or combination of assets) they can seize and sell if you default on your loan. This usually involves physical assets, such as property, inventory, equipment, or vehicles, but can include intangible assets.

In some cases, the collateral will be a blanket lien instead, though you should be wary of these since this allows the lender to seize all your business assets.

You may also need to make a personal guarantee to say that you will be held personally responsible for the loan, should your business fail. This is risky for many reasons, and likely negates the reason you formed an LLC in the first place since it makes you personally responsible for the loan.

Types of LLC business loans

  • Business term loans: This is the traditional type of loan where you borrow a lump sum and pay it back over a term of months or years.
  • Business lines of credit: This is a type of borrowing where the lender agrees a maximum limit with you, and you can borrow money within this amount whenever you choose. Some lines of credit work like a credit card, in which once you’ve paid back the money you’ve borrowed, it’s available again, while others only allow you to borrow the money once. With the latter, the line of credit is closed once you’ve borrowed the maximum.
  • Invoice factoring and financing: This type of credit is where you work with a third-party company to sell an outstanding invoice or borrow the money on an outstanding invoice. This is a good choice for businesses that work with big companies on net-30 or net-60 invoice terms and often find it difficult to smooth their cash flow between projects.
  • SBA loans: SBA (Small Business Administration) loans are highly sought-after because they are small business loans that are guaranteed by the government. This guarantee often helps you to borrow the largest amount of money with the lowest terms. That said, they often take months to receive.
  • Merchant cash advance: if you do the majority of your trading with customers through a card processor (such as Stripe) – it’s where a company will lend you money based on the payments you process. It is usually paid out as a lump sum and then paid back through a percentage of every transaction.
  • Business credit cards: business credit cards work the same way as consumer cards – you get a card with an agreed limit and can use it for business purchases up to that limit. You’ll have a minimum monthly payment to meet and interest to pay on the money you borrow.
  • Equipment loans: these loans are like term loans, but are secured against the equipment you buy with the loan. This makes them easier to get with lower terms, but the equipment will be seized if you don’t keep up your repayments.

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Which LLC business loan is best for me?

This depends entirely on what you need the money for and how creditworthy you and your business are. Most loans can be used for any purpose, so consider how long you want to borrow the money for before you move forward. If you’re experiencing a short-term cash flow problem, invoice factoring or a merchant cash advance may be what you need to buy new materials or inventory. If you want to borrow a significant amount to improve your business premises, a business term loan or SBA loan will likely offer you the best terms.

How can a business qualify for an LLC loan?

To qualify, you’ll need to be able to prove that you have a strong trading history, are currently making money, and have plans for the funds you want to borrow. Make sure you know your current business and personal credit scores, have an up-to-date business plan, and all of the other documents listed below.

What documentation do I need to apply for an LLC business loan?

Each lender will have their own requirements for what documentation you need to submit, as some types of loans (such as an SBA loan) are much stricter than other types (such as a merchant cash advance). That said, most lenders require:

  • Basic details about your business and the members, plus its operating agreement
  • A business plan (which may include some of the documents below)
  • A balance sheet showing your current financial position
  • Your profit and loss report
  • A cash flow statement
  • Forecasts and projections for your future growth, revenue, and expenses
  • Tax returns (for the LLC and you and any other members)
  • Details about the debts you already hold
  • Any legal contracts or agreements you have with other businesses that may affect how you use or pay back the loan

How to get a business loan with an LLC

To get a business loan as an LLC, you should:

  1. Understand where you stand financially. Have an up-to-date balance sheet, a profit-and-loss document, and a strong understanding of how much money you need to fund your goals.
  2. Check your credit scores – know your own (and any other member’s) and your business’s credit score.
  3. Choose which form of funding is right for you.
  4. Get the right documentation together for your chosen form of funding
  5. Compare rates and apply – remember that it’s incredibly important to get the lowest rates you can since it will affect how easy you find it to pay the loan back.

Apply for a business LLC loan

Ready to apply? It’s time to gather the right documentation and compare rates. Browse through the best business loans for LLCs here and find the rates and terms that best meet the needs of your business. When you’re ready to take the next step, click apply and start the process. With the right preparation, you’ll soon have the money you need to grow your business.

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