What is an LLC Business Loan? Loan Types and How to Apply

If you run a limited liability company (LLC), an LLC loan can help cover a wide range of business expenses, such as startup costs, working capital, expansion plans, and more.

An LLC loan works like almost any other small business loan. You apply through a lender and use the funds for any eligible purpose. The loan details include terms—such as interest rate, fees, and any loan restrictions—and the lender you use. Learn more about LLC loans and how they can help your business sustain or expand its operations.

What is an LLC business loan?

An LLC loan refers to any type of financing that provides funds to businesses organized as limited liability companies (LLCs). A term loan for an LLC typically operates the same as a term loan for other businesses: You borrow a set amount (the principal) and make repayments over a fixed period of time, typically several years. Your payments include part of the principal and interest, which is the cost of borrowing money expressed as a percentage of the loan amount. Lenders often also charge borrowers fees for issuing the loan.

LLC loans also encompass other financing methods, such as business lines of credit and merchant cash advances. Each type of financing comes with its own set of rules, as well as pros and cons.

One important note to keep in mind: Your company’s limited liability structure may not extend to an LLC loan. Lenders often require a personal guarantee, which is a clause in your business loan contract that says you will personally repay the loan if your business fails or defaults. Consider whether you’re comfortable putting your personal assets at risk before taking out an LLC loan.

Best LLC business loan options

1. SBA loan
2. Business line of credit
3. Term loan
4. Equipment financing
5. Merchant cash advance
6. Invoice factoring

LLCs have many financing options. The best loan for your business depends on factors like how you plan to use the funds and whether you’ll need money on an ongoing basis. Here’s an overview of the most popular types of LLC loans:

Type of loan	Benefits	Drawbacks	Best for
SBA loan	Lower interest rates, high loan limits, and long repayment terms	Strict borrowing requirements and a lengthy application process	Businesses that don’t need immediate funding
Business line of credit	Flexibility and potential cost savings	Borrowing limit may be lower than some term loans	Businesses that need flexibility and may need to borrow repeatedly
Term loan	Predictability, especially when the loan comes with set payments and a fixed interest rate	Must go through the underwriting process to borrow again	Companies that want set monthly payments
Equipment financing	Typically lower interest rates because the loan is secured by the equipment	Lender can seize the asset if you default on the loan	Companies that are purchasing physical assets and can afford the down payment
Merchant cash advance	Offers fast funding and doesn’t require strong credit	Won’t help you build business credit or personal credit to help with other borrowing	Businesses with consistent credit card sales or recurring revenue
Invoice factoring	Offers fast funding and doesn’t require strong credit	Fees can add up, and it’s not a good fit for companies that sell directly to customers since they don’t usually issue invoices	B2B companies that use invoices

1. SBA loan

Best for: Businesses that don’t need immediate funding

You can apply for SBA loans through approved private lenders, which may include traditional banks, credit unions, alternative lenders, intermediary lenders, and more. Your LLC gets the funds from the lender while the Small Business Administration (SBA) guarantees the loan.

Because a federal agency backs the loan, lenders take on less risk and can offer lower interest rates, higher loan limits, and longer repayment terms. You can even choose from six different types of SBA-guaranteed loans depending on your needs. But with all SBA loan options, you can expect strict borrowing requirements and a protracted application process.

2. Business lines of credit

Best for: Businesses that need flexibility and may need to borrow repeatedly

A business line of credit lets your LLC borrow up to a preset limit and then repay your balance through weekly or monthly payments. You can usually pay down some or all of the balance and borrow again without submitting a new application. This type of financing offers flexibility and potential cost savings because you only pay interest on the funds you borrow.

Lines of credit are a popular funding source among small business owners. In the Federal Reserve’s 2024 Report on Employer Firms, 43% of the businesses surveyed used this funding option.

3. Term loan

Best for: Companies that prefer predictable monthly payments

With a term loan, your LLC borrows a lump sum of money and typically repays the balance over several years. The longer repayment term makes these loans a good option for large expenditures like expansions or equipment upgrades.

Unlike a line of credit, you’ll have to reapply from scratch if you need to borrow additional funds.

This means you’ll need to submit a new application and repeat the underwriting process—which usually involves submitting an application, undergoing a credit check, and waiting for an answer. On the plus side, term loans usually come with a fixed interest rate and monthly installment payment; this predictability can help you budget and make a repayment plan.

4. Equipment financing

Best for: Companies that are purchasing physical assets and can afford the down payment

Equipment loans let you pay for tangible assets such as computers, furniture, machinery, appliances, vehicles—anything other than real estate. Your LLC typically makes a down payment that’s equal to a percentage of the value of the equipment. Then you finance the remaining amount. Repayment terms usually stretch over several years and come with fixed installments.

These loans may offer lower interest rates than term loans because they’re secured by the equipment you’re purchasing. But that also means your lender has the right to seize the asset if you default on the loan.

5. Merchant cash advance

Best for: Businesses with consistent credit card sales or recurring revenue

A merchant cash advance is an alternative type of business financing where your LLC receives an advance on its future credit and debit card sales. You receive a lump sum of cash that you can spend on anything—like salaries, rent, or inventory costs. You then repay the borrowed funds based on a percentage of your sales, plus a small fee.

Merchant cash advances may be a good option if you need funds immediately, your business tends to have seasonal highs and lows, and you haven’t built good credit yet. Shopify Capital, for example, doesn’t require credit approval and allows for quick funding and early renewals.

6. Invoice factoring

Best for: B2B companies that use invoicing

Invoice factoring involves selling your LLC’s unpaid invoices, or accounts receivable, to a special lender, known as a factoring company, in exchange for immediate cash.

The factoring company then collects the money from your customers and charges your company a fee, often between 1% and 5% of the invoice amount. This type of financing option could be a good fit for companies that sell goods or services to other businesses and are more likely to receive payments via invoices.

How to get an LLC business loan

1. Consider your needs
2. Check your credit
3. Compare LLC business loans
4. Submit the loan application
5. Provide loan documents
6. Provide collateral or a personal guarantee
7. Proceed through underwriting
8. Receive your loan funds

The process of getting an LLC loan can vary, depending on the type of financing you choose and the lender, but these are the general steps you’ll take:

1. Consider your needs

Taking out an LLC loan involves paying interest and fees, not to mention taking on the financial liability. So consider how much you need to borrow, what you can afford to pay each month, and the type of financing that works for you. Creating or reviewing your business budget can help with this step.

2. Check your credit

Lenders often check a company’s business credit scores along with the owner’s personal credit score at one of the credit rating businesses, such as Dun & Bradstreet, Experian, or Equifax. Having strong credit improves your chances of loan qualification and helps you get favorable terms, though some lenders do offer financing options for bad credit.

3. Compare LLC business loans

Get quotes from several lenders and compare interest rates, repayment terms, origination fees, and monthly payments. Knowing your credit score beforehand gives you an idea of which loans you might qualify for as you research. Using a business loan calculator can help you calculate your borrowing costs.

4. Submit the loan application

Once you’ve decided on the best loan option, fill out the application. You will typically need to provide names of all business owners, the company’s employer identification number (EIN), and details about your business.

5. Provide loan documents

Lenders will check your LLC’s finances to determine if you can pay back the loan. The requirements may vary by lender and loan type, but you usually need to include a business plan, business license, financial statements, tax returns, and information about your business’s other debts and obligations.

6. Provide collateral or a personal guarantee

Your company’s limited liability structure may not extend to an LLC loan. So depending on the type of financing you get, you may need to provide collateral or offer a personal guarantee, meaning you promise to repay the loan personally if your business fails or defaults.

7. Proceed through underwriting

Once your lender has the application and documents, it initiates a formal check on your credit, performs a final review of the materials, and makes a lending decision. Online lenders often process applications quickly—within a day or two—while brick-and-mortar banks or SBA lenders may take longer.

8. Receive your loan funds

If approved, you’ll receive the loan funds in your bank account. You can speed up the process by borrowing from the bank where you already have your LLC’s accounts.

*Shopify Capital loans must be paid in full within a maximum of 18 months, and two minimum payments apply within the first two six-month periods. The actual duration may be less than 18 months based on sales.