It might surprise you to find that Google, the company responsible for the worlds top search engine, required a serious investment when it first got started. Every company, even an LLC like Google, starts with a loan of some kind.
The point? An LLC business loan is an investment in the future of your company. With one, you can turn your startup into the real deal.
But, despite an LLC loan being a big help in the world of business, there are myths surrounding these devotions of money to growing companies.
This article is here to bust them. So, if you’re on board, read on for myths, legends, and hopefully some truths about LLC business loans.
What Is An LLC Business Loan?
LLC stands for “limited liability company”. An LLC is typically a light membership of co-owners that all share partial ownership over a company. You can think of an LLC as being like most small businesses out there but in this case, the structure is informed by the owners.
LLC’s are often considered hybrid business structures because they work like a corporation and a partnership all at once. An LLC avoids strong liability between its “members” and the company, while also avoiding double-taxation.
Because of its similarity to most small businesses, there are many LLC loans available, including but not limited to:
- Online loans.
- Virtual cards.
- Startup loans.
- Banking loans.
As we begin taking down myths surrounding LLC loans, consider the easiest business loans that work for you.
You Will Always Be Rejected If You Have Bad Credit
Myth. You can find alternative vendors, popular credit cards, and banks that won’t have trouble loaning money to your LLC if you have bad credit.
Where did this myth start? It’s likely that the credit industry perpetuated the theory for two reasons:
- It serves the industry.
- Those with bad credit had fewer loan options before the digital age.
Now that we’re in the midst of digital transformation, LLC loans can be afforded if you can prove your annual income, reasons for bankruptcy or debt, and begin making payments on your loan right away.
Don’t shy away from crowdfunding and applying consistently for microloans. You can look through Patreon for crowdfund examples, or look for online resources.
Another way this myth is busted: lenders don’t only look at your credit. They also weigh up your current savings, income, and your previous credit states.
Get An LLC Loan Then Raise Your Credit
You can raise your credit score by paying your bills on time. A technique that works: before you spend time raising your credit score, you can create your LLC, apply for a loan, then pay it off on time.
If you use this technique, first finding a lender that accepts a low credit score, then paying off the loan on time every month, your credit score will rise substantially.
There Are No Online Loans For LLCs
Myth. You can find successful LLC loans online. It’s possible some small businesses were scared off by online loans, as opposed to banks, because they aren’t always physical institutions. You can resolve this by defining the vendor you’re working with.
For instance, when you’re exploring an online loan vendor try looking for the ‘privacy statement’. Furthermore, read through the terms and conditions, and see if the website is SSL secure.
But, are there a lot of online options for LLC loans? Some of the options that require the least amount of effort on your end are, microloans, lines of credit, and business credit cards.
All of these options give your LLC quick funds, often don’t require good credit, and can be adjusted to meet your LLC’s needs.
A Helpful Tip
If you plan on taking this route, be sure to scan all paper-only documents for an online service. Another tip: make sure that you have consistent access to the internet while you wait for approval.
Your Loan Will Take Centuries To Be Approved
Okay, an obvious myth here. It only takes a few decades.
Another bluff.
If you’re using an online loan service for your LLC the actual approval process starts once you apply. That digital process finishes much faster than if you sent it by mail, and once you’ve included your contact information, you should get a reply in about 7 days on average.
You can speed up the process by overestimating the proof you need to get accepted. In terms of your background, as it applies to the loan, give the vendor as much information as you can. This can sometimes speed up business loan pre-approval process.
LLC’s Are Frowned On By Vendors
Myth, all the way.
LCC’s are typically made of multiple talented people with backgrounds in an enterprise – meaning that whether you work in the restaurant industry or fields of technology, you will get loan offers.
Again, you can raise your chances of loan approval if you document your progress before and during building your LLC. If you prove that you have skills or resources to create from your company, chances are you won’t be frowned upon.
Loans Are Not For Successful Businesses
Loans are not simply handouts from vendors, but forms of investment from financial groups, making this one a myth as well.
Companies that have years of experience may ask for a loan if they’re branching out, or want to raise their credit stream.
Once again, even if you have a successful enterprise, your LLC gain reputation by having a better credit score. You can achieve this by applying for a loan.
You can also depend on an LLC loan as part of your disaster recovery plan. If your company has suffered from a natural disaster, a DDoS attack, or something else you can use a business loan to recover while your systems are down.
It’s also worth considering that building a strong relationship with a vendor might allow you to use that vendor for other customers in the future.
Bank Loans Are Your Only Option
Let’s look at the many loan options out there to debunk this myth.
- SBA loans.
- Online loans.
- Equipment financing.
- Invoice factoring.
- Personal loans.
There. Now, let’s explore some of these paths.
Equipment Financing
You can go to EF’s if your credit is low. It’s defined by receiving loans for business-related equipment, providing it has a purpose in your LLC.
This can prove useful if your computers for an office you’ve just opened up. In the case of computers, you can finance these are your main money makers in digital marketing and software development.
Invoice Factoring
This option requires that you already provide products or services to customers, thus generating invoices. Once you’ve built up invoices, you sell your unpaid invoices to a factoring company.
What happens next is clever. The customers that you previously worked with pay the factoring company instead of you. When this is finished, the factoring company gives you back your balance and removes a fee.
This strategy can prove useful if you want to generate income while receiving a type of loan. If you regulate the process, you can continue building a strong customer base while paying off business utilities.
Personal Loans
A personal loan might be ideal if you don’t have a staff just yet. If you’re trying to build an LLC by yourself, you can apply for a personal loan at a higher interest rate than others.
In the case of personal loans, you don’t have to offer up any collateral. That means, if you ensure you can pay off the loan – providing financial proof – then you are likely to get funding.
There are caveats. As mentioned, the interest rates can be quite high, and the loans themselves are not always secure. If you’re interested in a personal loan, try looking for an option with low interest and high security.
Approval Processes Are Arbitrary
You can bust this myth by applying for yourself, only to see that approval doesn’t just take in your basic info and credit score, but depends on your salary and often considers your marketing plan.
What does this mean for you? Well, for starters, if you create a marketing plan that drives sales and proves income generation, you have a better chance of getting a loan accepted.
It’s also a good idea to keep track of the loans you’ve applied for. You can show this to some vendors as proof that you’ve exhausted your options. In some cases, diplomacy is your best option for getting a loan.
Furthermore, never let a rejected approval convince you that there’s something wrong with your company. If you have a tech LLC that needs funding, you can search for loans with angel investors and other big spenders who understand your vision.
Every Lender Will Charge You The Same Amount
Debunking this myth is straightforward, cast a wide net and search for many loan options for your LLC, and see what rates apply.
Keep your eyes on origination fees (an additional cost put on loan processing) to see what you’re actually charged. It’s also worth looking into fees that generate if you miss a payment or if your payment doesn’t go through.
By the way, before you start applying for loans that cost you extra fees, figure out how your business is defined, then choose a loan option that meets your criteria. This allows you to avoid fees that apply to loans for specific operations unlike your own.
How To Make The Most Of Your LLC Business Loan
An LLC is special in the context of the IRS and among small businesses, it is defined by limited liability between the partial owners of the company, making an LLC appear as most small businesses.
When you’re applying for a loan you can approach based on the structure of an LLC. For example, because you have a limited liability dependency, you can devote the loan to sectors you’d normally overlook.
Areas of a company such as IT support and recreation are options when you choose an LLC, and when getting a loan, you can put funds towards those avenues.
There are many ways to use an LLC loan to your advantage.
Find Options That Suit Your Business Model
When you’re looking for a loan, consider the application of those funds carefully. In other words, it’s worth asking yourself where you plan on putting the money you’re given to build your business.
One such example can be found in alternative fund research. In this case, once you’re given an initial LLC loan, start researching marketing projects that catch the eyes of other investors.
This method put your business on the map, making it easier to get larger loans down the line.
You should also consider the industry you work in. If you own an eCommerce company, your online store might require funding. You may need to buy actual resources, or access to store networks, all places that you can apply for an LLC business loan.
Fund Your Future
Most of the worlds leading companies like Apple and Facebook began as simple pieced together LLC’s and small enterprises.
With a proper LLC business loan, you can earn the necessary funds to raise your company from the ground up.
Now that you have become an expert LLC loan myth buster, it’s your time to grow as an enterprise all the way to the top.
Remember to exhaust your options, never overlooking the continued growth in online loan providers. When you started your journey you were without a path to funding, now you have one.
Start today by learning about companies that will give you great deals on a loan and start funding your future.