Are you looking to open an LLC in the United States, but you lack capital? Would you like to secure a commercial loan to kickstart your new business?
Here, we’ll provide you with all the information you need about loans for LLCs, including the types of loans, tips, frequently asked questions, and more.
Let’s get started.
4 Types of Loans to Start Your LLC in the USA
If you need to finance your LLC or small business, you should be aware of the various options available for this type of financing.
So let me show you the choices you have so you can determine which one truly suits you when starting your business in the United States.
1. Bank Loan
Banks are one of the options for loan applications.
The benefit of these options is that you can secure loans at better rates than, for example, a private lender.
As is common with banks, the application process can be a bit lengthy.
So, if you need something quickly, this is not the best option. However, it is a good choice if you are looking for something safe with a favorable rate.
Many of these banks require a fairly high, even excellent, credit score.
If you don’t have a good enough score, it’s likely that your application will be denied.
But don’t worry, we’re just getting started. Let me continue to show you other loan options for your limited liability company.
2. SBA Financing and Loans for LLCs
The SBA offers various financial options for almost any type of business (small businesses like LLCs, C Corps, S Corps, and more), making it very convenient.
They provide low down payments, reduced collateral requirements, and long terms.
The requirements set by an SBA include:
- Having a for-profit business.
- Your business must be legally organized as a sole proprietorship, partnership, corporation, or limited liability company (LLC).
This type of loan is known as the cheapest in the market for LLCs.
If we talk about the downsides, we’ll only highlight that qualifying for government loans can be difficult and, in some cases, it may take several months.
3. Credit Line
Credit lines work as a flexible solution to start with your LLC.
Well, in this case, you aren’t provided with a large sum of money to start a business; instead, you’re given a line of credit that you can use as needed.
Using this type of loan helps you save money on costs since you only pay interest on the amount you use.
Regarding the downside of this type of loan, the annual interest costs could be above 25%.
4. Factoring to Start a Business
If you haven’t been able to build your credit score yet, factoring can be a good option.
This type of financing involves selling your accounts receivable to a lender.
The lender who buys them from you will handle collecting the invoices in your name.
Like the previous option, the drawback of this type of loan is the high rates. The APR starts at 30% and goes up from there.
Now, let’s look at the requirements needed to apply for a loan.
What are the requirements for applying for a loan to start your Limited Liability Company?
There are loans for new businesses that require a high credit score, while others do not; it varies greatly.
Depending on the type of loan, you will find different requirements.
However, I will show you the most common requirements for financing your LLC:
- A certain monthly sales flow (some lenders might require monthly gross sales of $8,000 or more).
- A good FICO score, as many lenders, or most of them, do not provide loans if you have a bad credit score or none at all.
- The time your business has been in operation. Some lenders may not need as much time, but others might require over 2 years of operation.
- Some lenders might ask for collateral.
- Lastly, they may also require you to have an SSN to approve the credit.
Knowing these requirements can help you determine which type of loan to apply for, based on the details I provided above for each of them.
How to Apply for a Loan for Your LLC in 3 Steps
1. Choose the Type of Loan
After the information we provided, you should have more clarity and know which type of loan suits your LLC or small business best.
For example, if your credit score isn’t very high, you might opt for a line of credit.
But if you’re looking for low rates, you could choose an SBA financing option.
2. Choose a Lender
Contact several lenders you have in mind and check that you meet the requirements they ask for.
Select the one that’s most suitable for you.
3. Apply for Your Loan
Once you’ve chosen the type of loan and the lender, it’s time to make your application.
Gather all the documents and requirements they request and submit them.
Then, you just need to wait for their response regarding the approval of your application.
Need Help Setting Up Your Business in the United States?
At Rex Legal, we are fully committed to helping you establish your business in the USA.
If you need advice or our professional guidance to successfully complete the entire process, then contact us.