Did you know that 82% of small businesses fail because of cash flow issues? That can be disheartening to hear, especially if you’re already facing other challenges with your company.
However, there are ways to tide you over so that your business not only survives, but also thrives. Obviously, access to more cash can be a godsend, and one way to do this is to apply for business loans.
Can you get a business loan with an LLC though? And if you can, what’s available to you? Read on to discover the answers and ensure your company’s security.
Can You Get a Business Loan With an LLC?
Yes, you can get a business loan with an LLC! This should come as a big relief, as this means that you’ll be able to inject cash in the areas that need it.
If you don’t already have an LLC, then we can help with our free business registration service. All you pay is the state fee, and you’ll have an up-and-running company within a few working days.
Once you’re set up, you can consider the following LLC loans if you need more capital.
Business Credit Cards
If you only need money for smaller purchases, then consider business credit cards first. This is perfect for short-term financing and can mean the difference between opening or closing your doors on a certain day. In the long run, it’s also great for smaller, recurring purchases since you can build business credit.
An issue can be your credit limit; it’ll depend on your creditworthiness, so if you don’t have a good history, you won’t have much to work with. Also, there are high interest rates if you don’t pay the balances in full.
Business credit cards are easy to access and use though. And if you sign up for excellent oneness, there are rewards and cashback programs you can utilize.
Invoice Financing
Invoice financing is when you get advance cash against outstanding invoices. This allows you to maintain cash flow while waiting for your clients to pay.
This type of “business loan” is optimal if you have long invoice payment cycles but have steady customer demand to keep pace. You’ll get quick access to funds tied up in accounts receivable, usually 70-90% of the invoice value. Plus, there’s no need for collateral beyond the invoices.
The caveat is that you’ll have to rely on your clients to pay invoices on time. In addition, the fees and interest charged on the advanced amount can be high.
Equipment Financing
Equipment financing is similar to invoice financing, except you use the equipment itself as collateral. This type of “business loan” is ideal if you need to get machinery, vehicles, or other tools that are essential for your business operations.
Usually, equipment financing offers 80-100% of the equipment’s value, and the repayment terms are aligned with the equipment’s useful life. You’ll have fixed payments with predictable terms.
However, defaulting can be devastating to your operations. You’ll lose your equipment in that case.
Term Loans
Term loans are more traditional in terms of getting an LLC business loan. You’ll get a lump sum of money, which is repaid over a fixed period (with interest). The interest rates can be either fixed or variable.
If you don’t have consistent cash flow, it may be challenging to meet the strict repayment terms. However, term loans are fantastic for major business investments, such as expansion, purchasing inventory, or significant operational costs, as you can get a substantial amount of money.
SBA Loans
The US Small Business Administration (SBA) offers partially guaranteed loans through partner banks. You can borrow anything from a few thousand to several million dollars, depending on your situation and needs.
There are many SBA loans, and they come with lower interest rates and longer repayment terms. This is great if you have limited collateral but have good credit. There are strict eligibility requirements and a lengthy application process, so not everyone will qualify.
Business Lines of Credit
With business lines of credit, you’ll have a revolving credit facility that allows you to obtain funds whenever you need (up to a set limit). Because they’re flexible, these lines of credit are best for managing cash flow, short-term needs, or unexpected expenses.
They may have higher interest rates than term loans, but once you’ve repaid the debts, the funds will become available again. Also, do note that the credit limits depend on business qualifications.
How to Get a Business Loan With an LLC
The LLC loan requirements will differ depending on the route you choose. However, here are some of the basic ones you can expect.
Business Plans
Lenders will want to know about how their money will be used and repaid. Plus, they’re more inclined to trust you if you seem like you have a solid goal. Writing up business plans will help with not only small business loans, but also keeping yourself on track, so it’s a win-win situation.
Financial Records
If you can prove that you’ve been financially responsible and that your LLC has been profitable, then lenders will have better peace of mind. So provide things like income statements, balance sheets, and tax returns.
Credit Score
Credit scores are the industry standard when it comes to trustworthiness. If you can provide an excellent personal credit score alongside your company’s, then it’ll significantly increase your chances of getting a business loan.
Collateral
For some loans, you may need assets to secure the loan. For example, both invoice and equipment financing require you to put those two things up as collateral. If these are the options you’re considering, then make preparations ahead of time.
EIN
Some lenders may want you to show proof of your LLC’s registration. You can do this by providing your EIN.
Secure the Funding You Need
The answer to the question, “Can you get a business loan with an LLC?” is “Yes.” This should be a huge relief for small business owners, as this means they don’t have to rely solely on their own capital to be a success.
There are quite a few options available, so explore them to see what’s best for your LLC and personal circumstances. And if you need assistance applying, then don’t be afraid to reach out to professionals to speed things along.
Sign up with Business Anywhere today if you want to start your own LLC. Not only is our business registration service free, but our first year of registered agent services is too!
