To get a loan with an LLC, you apply through a bank, credit union, online lender, or an SBA-backed program, submit documents that prove the entity exists and generates enough cash to repay, and in nearly every case sign a personal guarantee that puts your own assets behind the debt. Lenders treat newer LLCs and their owners almost interchangeably when judging risk, so your personal credit and finances weigh nearly as heavily as the company’s balance sheet. The path is straightforward once you know what each lender wants and which product fits your situation.
Documents to Gather Before You Apply
Missing or inconsistent paperwork is one of the easiest ways to stall or kill an application. Have this ready before you approach a lender:
- Articles of Organization filed with your state, confirming the LLC exists and its formation date.
- Operating Agreement showing which members can sign contracts and take on debt. Most lenders require one even if your state does not.
- EIN confirmation. The IRS issues a CP 575 assignment notice after you file Form SS-4, and lenders use it to verify your tax identity.1Internal Revenue Service. Instructions for Form SS-4 (12/2025)
- Two years of business and personal federal tax returns. If your LLC is taxed as a partnership, that’s Form 1065; if it elected S-corp status, Form 1120-S.2Internal Revenue Service. About Form 1120-S, U.S. Income Tax Return for an S Corporation
- 12 to 24 months of business bank statements showing deposits, withdrawals, and average balances.
- Social Security numbers for any member with at least a 20 percent stake, so the lender can run credit checks on the people behind the LLC.
Choosing the Right Type of Loan
The best product depends on what the money is for, how fast you need it, and how long the LLC has been operating.
SBA 7(a) Loans
The SBA doesn’t lend directly. It guarantees a portion of a loan made by a participating bank or credit union, which lowers the lender’s risk and produces better terms than you’d get on your own.3U.S. Small Business Administration. 7(a) Loans The maximum is $5 million, and proceeds can cover working capital, equipment, real estate, or refinancing existing debt.4U.S. Small Business Administration. Terms, Conditions, and Eligibility Funding typically takes 60 to 90 days because of the federal review. As of early 2026, variable rates run roughly 9.75 to 13.25 percent, with fixed rates somewhat higher. Your LLC also has to show it couldn’t get financing on reasonable terms elsewhere.
SBA 504 Loans
The 504 program is built for long-term, fixed-rate financing of major assets like commercial real estate or heavy equipment, up to $5.5 million. A conventional lender funds about half, a Certified Development Company adds up to 40 percent with an SBA-backed debenture, and you put down at least 10 percent.5U.S. Small Business Administration. 504 Loans The fixed portion keeps payments predictable across a 10- or 20-year term.
SBA Microloans
For smaller needs, the SBA microloan program offers up to $50,000 through nonprofit intermediary lenders.6U.S. Small Business Administration. Microloans Each intermediary sets its own credit and collateral requirements, and this is often the most accessible option for newer LLCs. Common uses include working capital, inventory, supplies, and equipment.
Traditional Term Loans
A bank term loan gives you a lump sum repaid on a fixed monthly schedule. The term usually matches the useful life of what you’re financing: five years for equipment, up to 25 years for commercial real estate. Rates on conventional small business term loans generally run about 10 to 27 percent in early 2026, depending on credit and lender.
Business Lines of Credit
A line of credit behaves like a credit card. You draw as needed, pay interest only on what you’ve borrowed, and the limit refreshes as you repay. That makes it well suited for cash flow gaps such as payroll during a slow month. Rates tend to fall between about 10 and 28 percent.
Equipment Financing
Equipment loans use the machine or vehicle itself as collateral, which lowers the lender’s risk and eases qualification. Rates generally land between 10 and 24 percent. The money can only go toward the specific equipment financed, and the lender can repossess it on default.
What Lenders Actually Evaluate
Personal Credit Score
Because most small business loans require a personal guarantee, your personal FICO score is often the first filter. A score of 680 or above opens the door to competitive rates and SBA programs. Between 600 and 680 you can still qualify for some products but at higher rates. Below 600, your options narrow to alternative lenders and products like merchant cash advances, where the cost of capital rises sharply.
Debt Service Coverage Ratio
The debt service coverage ratio, calculated as net operating income divided by total debt service, tells the lender whether your income can absorb both existing debt and the new loan. Most want at least 1.25, meaning the business earns $1.25 for every $1 of debt obligation. Falling below that is where a lot of applications that look fine on paper come apart.
Time in Business and Revenue Consistency
Two years of operating history is the usual floor, because it gives enough data to see trends. Consistency matters more than raw totals. A business earning $400,000 a year with steady monthly deposits looks stronger than one earning $600,000 with wild swings. For SBA 7(a), your LLC must also be an operating, for-profit business located in the United States and meet SBA size requirements.3U.S. Small Business Administration. 7(a) Loans
The Personal Guarantee
Most LLC owners underestimate this part until they’re at the closing table. A personal guarantee is a contract in which you agree to repay the loan out of your own pocket if the business can’t. For that specific debt, it effectively strips away the liability protection you formed the LLC to get.
For SBA loans, a personal guarantee is mandatory for any owner holding 20 percent or more. If no single person clears that threshold, the SBA still requires at least one owner to guarantee the loan. These are almost always unlimited guarantees, so each signer is on the hook for the full balance rather than a share proportional to ownership.7NCUA. Personal Guarantees Conventional lenders follow similar patterns, though some will negotiate a limited guarantee that caps your exposure at a specific dollar figure.
If the LLC defaults, the lender can pursue your personal assets: real estate, bank accounts, investment accounts. The guarantee typically survives your departure from the company, so selling your membership interest doesn’t automatically release you. Default activity can also land on your personal credit report and stay there for years.
Collateral and UCC Filings
Most secured business loans require collateral in addition to the personal guarantee. A specific asset lien covers one item, like the truck or CNC machine you’re financing. A blanket lien covers essentially everything the LLC owns, including inventory, equipment, and receivables. Blanket liens are common with lines of credit and general-purpose term loans.
Lenders formalize these claims by filing a UCC-1 financing statement with the state, which creates a public record of the interest and establishes priority.8Legal Information Institute. UCC – Article 9 – Secured Transactions Whoever files first generally gets paid first if the business fails. That matters practically: if one lender already holds a blanket lien on your LLC, a second lender may balk because they’d sit behind the first in a default. Checking existing UCC filings before you apply helps you anticipate the objection. Filing fees vary by state, running roughly $10 to $100 or more depending on the method, and the lender usually files but passes the cost to you at closing.
How the Application Moves
Once you’ve chosen a lender and product, you submit the full documentation package, usually through a secure online portal, though some banks still handle it through a commercial loan officer. The lender checks completeness, then sends it to underwriting. Expect a hard credit inquiry that will temporarily nick your personal score.
Conventional bank loans sometimes produce initial decisions within a week or two. SBA-backed loans typically take 60 to 90 days from application to funding because of the added federal review. If approved, you’ll receive a commitment letter setting the interest rate, repayment schedule, fees, required collateral, and conditions you must meet before closing. Read it closely. The rate can differ from what was quoted informally, and conditions like maintaining a minimum bank balance or carrying specific insurance become binding once you sign. Funds disburse to the LLC’s bank account after closing.
Why Applications Get Denied
Denial rates for small business loans stay high. SBA applicants faced roughly a 45 percent rejection rate in recent years. The most common reasons:
- Cash flow that falls below a 1.25 debt service coverage ratio.
- A personal FICO score below 620 to 680, which disqualifies you from most SBA programs and competitive bank products.
- Less than two years of operating history. The SBA’s Working Capital Pilot program requires only one year, but most standard 7(a) lenders want two.3U.S. Small Business Administration. 7(a) Loans
- An existing blanket lien or heavy outstanding debt, which reduces available collateral and hurts your DSCR.
- Incomplete documentation or inconsistencies between the application and the bank statements.
Lenders are required to explain a denial. Use that feedback: sometimes the fix is as simple as paying down a balance to lift your coverage ratio or waiting a few more months to build history before reapplying.
If Your LLC Is Less Than Two Years Old
The conventional path is harder for young LLCs but not closed. SBA microloans are designed for smaller and newer businesses, and intermediary lenders tend to be more flexible on credit history.6U.S. Small Business Administration. Microloans Equipment financing is another realistic entry point because the equipment secures the loan regardless of how long you’ve been operating.
Business credit cards can do double duty: immediate access to revolving credit for everyday purchases, and, with responsible use, a business credit profile that strengthens future loan applications. Keeping personal and business spending on separate cards also produces cleaner books when a lender reviews them.
Be cautious with merchant cash advances. They exchange a lump sum today for a percentage of future revenue collected through daily or weekly automatic withdrawals. Qualifying is easy, but the effective annual cost often exceeds 40 percent and can climb well past 100 percent on an APR basis. For most LLCs, an MCA belongs at the bottom of the list, after SBA, bank, and credit union options are exhausted.
How Borrowing Affects Your Taxes
Loan proceeds are not taxable income. Because the loan carries a matching repayment obligation, the IRS doesn’t treat the money as revenue, and receiving it has no effect on your return.
Interest you pay is generally deductible as a business expense. Under Section 163(j), the deductible amount in any year cannot exceed your business interest income plus 30 percent of your adjusted taxable income, and any interest disallowed in the current year carries forward. Small businesses are exempt if their average annual gross receipts over the prior three years fall at or below an inflation-adjusted threshold: $31 million for tax year 2025, with 2026 expected to be slightly higher once the IRS publishes it.9Internal Revenue Service. Questions and Answers About the Limitation on the Deduction for Business Interest Expense Most LLCs seeking a first business loan fall well below that threshold, so the full deduction applies.