Business loans for LLC owners work the same way as funding for any other business. An LLC can get the same revenue-based financing, lines of credit, equipment financing and long-term loans as a corporation or a sole proprietor, and funders decide mainly on revenue, time in business and credit, so forming the LLC rarely changes the answer. It does change the paperwork, who signs and which tax form a long-term lender reads, and it does not usually spare you a personal guarantee. General rules are in our guide to small business loan requirements, and the steps are in how to get a business loan.
How business loans for LLC owners work
A plumbing company with $60,000 a month in deposits reads about the same to a revenue-based funder whether it is an LLC, a corporation or a sole proprietorship. The structure can matter more at a bank, since the SBA's guide to launching a business says banks are hesitant to lend to sole proprietorships.
| Part of your file | What the LLC changes |
|---|---|
| Size of the offer | Nothing directly, since offers follow revenue, credit and time in business. |
| Who owes the debt | The LLC is the borrower, and its debts are its own under state law. |
| Who signs personally | Usually nothing, since funders commonly ask owners for a guarantee. |
| Time in business | Usually nothing, since it tends to follow the business. |
| Documents | It adds formation papers and, at a bank, proof of who can sign. |
| Tax returns | The form depends on the number of members and any election. |
The documents lenders ask an LLC for
Long-term lenders commonly ask for most of these, and faster products need fewer. Names vary by state, and each lender's checklist decides what you send.
| Document | What it shows | How to get it |
|---|---|---|
| Articles of organization | The SBA lists the company name, address, member names and registered agent. | Your state's filing office. Delaware calls it a certificate of formation. |
| Operating agreement | How decisions are made and each member's powers, which lenders commonly read for the ownership split and who can sign. | Your own records. The SBA's guide recommends one even where the state does not require it. |
| EIN letter | The IRS tax number assigned to the LLC. | Your confirmation letter, or Letter 147C from the IRS by phone if it is lost. |
| Certificate of good standing | The state shows the LLC as active. | Your secretary of state. California calls it a Certificate of Status and issues it online within minutes. |
| Resolution or member authorization | The members approve the loan and name who signs. Banks commonly ask for this. | The members draft it, or use the lender's form. |
Our application asks for the legal name, any DBA, the EIN and the state the LLC was formed in (the form says "state of incorporation"), and all of them should match your statements.
What an LLC sends for each product
| Product | Amount | What an LLC sends | How fast |
|---|---|---|---|
| Revenue-based financing | $5,000 to $2,000,000 | The application with owners' details and four months of business bank statements as PDFs, then a voided check and photo ID before funding | Typically funded within one to two business days of choosing an offer |
| Line of credit | Up to $2,000,000 | The application and recent business bank statements, sometimes tax returns | Offers in one to two business days |
| Equipment financing | Up to $500,000 | The application, bank statements and a quote or invoice | Offers typically in one to two business days |
| SBA-equivalent and bank loans through partners | Up to $5,000,000 | Two to three years of tax returns, a personal financial statement, a debt schedule and commonly the papers above | Weeks |
| Commercial equity loans | Based on the property's equity | Financials, property and mortgage details, and the papers of any LLC holding title | Commonly weeks, for the appraisal and title work |
Revenue-based financing is a merchant cash advance. A funder buys part of your future sales in advance, sizes the amount on your usual revenue and collects a set daily or weekly payment, with the cost quoted as a factor rate. Our merchant cash advance document checklist covers the statements in detail.
Who signs and who guarantees in an LLC
Signing for the company and guaranteeing personally are separate acts. In a single-member LLC, one person does both. In a multi-member LLC, the operating agreement says who can bind the company, and each lender decides whose guarantee it wants, usually by ownership stake. The thresholds differ by who is asking.
- Our application asks for your ownership percentage. If you own half or less, it asks for the contact details and percentage of whoever owns the rest, and we email each co-owner a link to review the application, add their own Social Security number, date of birth and home address, and sign. An owner with more than half can complete it alone, though a funder can still ask for the other members later.
- Banks work to a federal rule, 31 CFR 1010.230, that has them identify each person who owns 25% or more of a company, plus one person who controls it.
- Real SBA loans draw the guarantee line at 20%.
Does a personal guarantee still apply to an LLC?
A personal guarantee applies to any LLC owner who signs one, and small-business funders commonly ask. Delaware's LLC statute, section 18-303, says the company's debts are solely its own and that no member is personally obligated "solely by reason of being a member". Its next subsection says a member may agree to be personally obligated under another agreement, and a guarantee is that agreement. Other states word this differently, so ask an attorney about yours.
The shield keeps covering the debts you did not guarantee. If the LLC stops paying a bank loan you guaranteed, that lender can come to you, while a supplier you never signed with generally has to look to the LLC. Courts can set limited liability aside in serious cases, and Cornell's Legal Information Institute gives intermingling personal and company assets as an example.
A long-term loan's guarantee usually covers the debt itself. In a typical advance contract, the owner guarantees that the business will keep its promises, such as leaving deposits in the named account. Our guide to business loans with no personal guarantee covers limited and unlimited guarantees.
A brand-new LLC versus a business that became an LLC
A brand-new LLC with no sales gives a funder nothing to read, because the filing itself creates no history. The funders we work with generally look for about a year in business and about $20,000 a month in deposits. If you're not there yet, apply anyway. Some funders work with newer or smaller businesses, and we'll tell you what's realistic. Our guides to startup business loans and how to build business credit cover that stage.
A business that traded for years and then became an LLC is a different file, because time in business generally follows the business, though each funder sets its own rule. Our application asks for the date the business started trading, and the SBA's rulebook, for its equity rules, counts a start-up by time spent "generating revenue from intended operations". Send earlier statements and tax returns with a one-line note connecting the old name to the new one.
The EIN may change too. Under the IRS's new EIN rules, a partnership that converts to an LLC taxed as a partnership keeps its number, and a sole proprietor's EIN can carry over to a single-member LLC with no employees or excise taxes. If your number changed, say so when you apply, because older returns will show the old one.
A single-member LLC with its money in a personal account
If your LLC's sales land in your personal checking account, a revenue-based funder has trouble counting them, because it decides on business bank statements. Tax filing is a separate matter, since the IRS treats a single-member LLC as part of the owner's return by default.
The fix is a business account in the LLC's exact legal name. The SBA says you need an EIN to open one, and that keeping business funds apart from personal funds is part of your liability protection. The IRS issues EINs free, including for banking when you don't need one for federal tax, and our application asks for one too. Then send your card processor and customers to the new account, because funders take transfers and owner deposits out of the revenue figure. Each month of real sales deposits builds the four months a funder reads.
How your LLC's tax status shows up in a lender's file
Revenue-based funders rarely read tax returns. SBA-equivalent and bank lenders read them closely, and the IRS classification decides which return they get. By default, a one-member LLC is disregarded and an LLC with two or more members is a partnership, and either can elect corporate treatment.
| How the LLC is taxed | The return | Income figure | Owner pay |
|---|---|---|---|
| One member, the default | Schedule C on the owner's Form 1040 | Net profit, line 31 | No line for it, so net profit is before anything you take out |
| Two or more members, the default | Form 1065, with a Schedule K-1 for each member | Ordinary business income, line 23 | Guaranteed payments to partners, line 10, come off first |
| Elected S corporation | Form 1120-S, with Schedule K-1s | Ordinary business income, line 22 | Compensation of officers, line 7, comes off first |
Line numbers can shift between tax years. As an example, a business that clears $150,000 before paying its owner shows $150,000 of net profit on Schedule C. Taxed as an S corporation with an $80,000 officer salary, it shows about $70,000 of ordinary business income before payroll taxes. Lenders adjust for this, and the SBA's rulebook has them justify items such as owner's draw. If your LLC changed its election during the years a lender reads, add a short note.
SBA loans for LLC owners: the 7(a) rules
Today Capital Group does not place SBA loans, so this section is information only. Through our partners we offer SBA-equivalent loans with long terms and monthly payments, where the partner sets the terms. They sit outside the SBA program, so they can even pay off advances, and they take weeks.
Under the SBA's lending rulebook, SOP 50 10, a standard 7(a) loan goes up to $5,000,000, and an LLC must be organized for profit like any other applicant. Any individual who owns 20% or more must give an unlimited full guaranty on SBA Form 148 or a lender's equivalent. If nobody reaches 20%, at least one owner must guarantee in full, and the lender can require a guaranty from others, such as a minority member who is critical to the business.
All owners and required guarantors must be U.S. citizens or nationals with their principal residence in the United States, and outside the Express programs the lender must obtain IRS tax transcripts and reconcile them with your numbers.
A worked example for a two-member LLC
The figures below are an example only, not a quote or the terms of any funder. Say a plumbing LLC has traded for five years, the first three with one owner on Schedule C and the last two with a second member on Form 1065. Each member now owns 50%. Deposits average $75,000 a month. The latest Form 1065 shows $96,000 of ordinary business income after $120,000 of guaranteed payments, plus $14,000 of depreciation and $6,000 of interest, and the LLC pays $24,000 a year on a van loan. It wants $80,000 for a bigger shop.
| $80,000 example | Revenue-based financing | SBA-equivalent loan |
|---|---|---|
| Example pricing | 1.30 factor rate | 11% interest over 7 years |
| Total repaid | $104,000 | $115,062 |
| Cost | $24,000 | $35,062 |
| Payment | $2,000 a week for 52 weeks | $1,369.79 a month for 84 months |
Because each member owns half, whichever one fills in our application adds the other, who gets the link and signs. A long-term lender reading three years would see one Schedule C and two Forms 1065, so add a short note. The $2,000 payment is about 12% of an average week's deposits ($17,308). On the long loan, operating cash flow of $116,000 ($96,000 + $14,000 + $6,000) against yearly debt service of $40,438 ($24,000 + $16,438) gives coverage of about 2.87. The SBA asks for at least 1.15 on standard 7(a) loans, used here only as a yardstick.
Both members would commonly guarantee the long loan. If those guarantees are joint and several and the LLC stops paying with $50,000 left, the lender can collect the full $50,000 from either member, who is then left to recover the other's share. With an 85/15 split, the 85% member could complete our application alone, and the 15% member would sit below the SBA's 20% line, though a lender could still ask.
What to fix before you apply
- Check your LLC's status with the state, file any overdue annual report and order the certificate of good standing.
- Update the operating agreement to show today's members and percentages, since the SBA's guide warns that in some states a member joining or leaving can require the LLC to dissolve and re-form unless an agreement covers it.
- Make the legal name, EIN and bank account match.
- Move every sale into the LLC's business account.
- File any missing federal returns, because long-term lenders read them and SOP 50 10 bars SBA financing for an applicant with unfiled returns.
- Tell your co-owners that a link is coming.
How to apply for funding for your LLC through us
Start with the short application and send four months of business bank statements as PDFs, or email them to us. Most funders prequalify from bank statements and a soft pull, so getting matched does not need a hard credit pull. One application goes to the funders in our network, the offers come back side by side, and we go through them with you before anything is signed. There is nothing to pay to apply or to see offers. To talk it through first, call (818) 351-0225.
Frequently asked questions
Can an LLC get a business loan?
An LLC can get the same business loans and funding as other entities, and funders decide mainly on revenue, time in business and credit, so being an LLC rarely changes the answer.
What documents do I need for an LLC business loan?
Revenue-based financing usually starts with a short application and four months of business bank statements, while long-term lenders commonly add articles of organization, an operating agreement, an EIN letter, a good standing certificate, a resolution and tax returns.
Do I have to personally guarantee a loan to my LLC?
Funders commonly ask LLC owners for a personal guarantee, and signing one makes you answerable for that debt even though the LLC's debts are otherwise its own.
Can a single-member LLC get a business loan?
A single-member LLC can get the same funding as any other business, and the member usually signs for the company and guarantees as well. Sales should run through an account in the LLC's name, because funders read business bank statements.
Can an LLC get an SBA loan?
An LLC can apply for an SBA 7(a) loan like any other for-profit business, and any individual who owns 20% or more must give an unlimited full guaranty. Today Capital Group does not place SBA loans, but our partners offer SBA-equivalent loans, which take weeks.
