How to Get an LLC Loan with Bad Credit

Alternative Small Business Funding

As an LLC - limited liability company - you’ll know the importance of financing. Whether you need funds to launch the business, upgrade your equipment, or buy property, it’s not always possible to cover expenditure with funds already in the business. In this case, you need to get an LLC loan. However, what happens if you have bad credit? Does this mean the end for your business?

Today, we’re going to discuss how you can get a business loan with bad credit. What’s more, we’re also going to introduce alternative financing and other methods of funding your business this year.

Purpose of an LLC Loan

Before looking at the various options for business owners, why would you need a loan in the first place? As mentioned previously, you may not have the resources in the business to cover expenses. For example, this could be to:

• Purchase new equipment
• Hire new staff
• Cover payroll during a slow period
• Renovate property
• Invest in new property
• Meet day-to-day expenditure demands

Ultimately, you could need funds for anything in your business. While some use a loan to invest in expensive new equipment or even a new building, others just want to pay suppliers during a slow quarter. With this in mind, you must choose the right option for the future health of your business. Thankfully, you have lots of help available from the South Florida Funding Group.

Importance of Your Credit Score

Whether or not you have a business credit score will depend on how long you’ve been in business. If you haven’t yet reached your first anniversary, you’re unlikely to have a credit score because the credit reporting agencies don’t have enough history or information. While this might sound like good news, no credit score is often worse than a poor credit score because it gives lenders no information as to your reliability or creditworthiness.

If you don’t have a business credit score, you also need to be aware that lenders could use your personal credit score as a guide. If both scores are poor, you might think that it’s impossible to get a business loan with bad credit. Well, don’t be so hasty because we could have some advice that helps your LLC this year.

Types of LLC Loan and Alternative Funding

In this next section, we want to discuss some of the leading options for those seeking an LLC loan or alternative financing.

LLC Bank Loans

Since this is traditionally one of the best options, we should start with an LLC bank loan. You’ll apply to the bank for a loan, and it will consider your personal and business history. Then, you’ll enjoy favorable terms compared to other forms of financing. However, the biggest problem is that they’re notoriously difficult to get (you don’t need us to tell you this!).

Especially since the global financial crisis back in 2008/2009, banks aren’t so willing to give loans to businesses without strong credit scores and business histories.

LLC SBA Loans

Therefore, those with bad credit might benefit from an SBA loan. When you apply for this type of loan, you’re essentially asking the Small Business Administration to secure a large portion of the loan. Therefore, you only need to secure a smaller part of the loan. Once again, terms are favorable and you’ll have many years to pay off the amount.

However, the application process and credit requirements can still make this loan unobtainable for many businesses. If this is the case, keep reading through this list.

LLC Business Line of Credit

If you’re seeking finances to meet day-to-day expenses, you may not need a loan. In fact, there could be a better option for you than an LLC loan…and it’s in the shape of a business line of credit. Essentially, these work like personal credit cards in that your account will have a borrowing limit. If you don’t touch the account, you don’t have to worry about interest. If you borrow funds, you’ll have a certain period to pay back the amount before interest applies.

This is a fantastic solution if you only need funds on a short-term basis to meet simple demands. For example, it could be buying stock or paying unexpected costs. So long as you pay the amount back, you won’t get bombarded with all sorts of fines and interest charges. Once you’ve repaid the amount, the account is balanced. Yet, this doesn’t mean the end to your relationship with the lender. Unlike a loan, you can dip into this money whenever you need it.

Of course, you’ll need to show caution with this option because account management is critical. If you keep borrowing and struggle to make repayments, the interest charges will keep rising and it’s easy to lose control. If you choose a business line of credit, be sensible when using it.

LLC Invoice Financing

At this stage, we’re moving into the alternative funding side of the market. How does this work and is it a good solution for your business? Well, we’ll answer this question with another question - do you currently have lots of income tied up in unpaid invoices? If so, invoice financing allows you to receive income now in return for a percentage of all unpaid invoices.

After signing on the dotted line, you’ll generally receive around 85% of all invoices in advance. Then, the money is transferred to the lender as soon as the clients settle. While this does mean that you can lose up to 15% of all invoices, it also means that you have more security in the short term. If you have a short-term cash flow issue, this is a great way to overcome the problem. You meet your short-term requirements, the lender makes a small profit, and the business is unaffected in the long term.

LLC Online Term Loans

Next, we come to a flexible option for LLC businesses. While some have repayment terms covering five years, others are less than one year. Since everything takes place online, the application process is also simple (this can save lots of headaches compared to traditional loans!). When people search for a business loan with bad credit, this is normally the answer they seek.

Generally speaking, requirements are low for LLC businesses. However, be aware that your interest rates will be higher if you have bad credit. The better your qualification, the better the terms you receive in return. Also, another warning is that interest rates are sometimes astronomical with this solution. Consequently, you must consider the lender and the terms of the loan before signing anything.

LLC Equipment Financing and Leasing

If you want to own equipment but don’t quite have the money upfront, another alternative financing method is to finance the equipment instead. If you’ve ever bought a mobile device or a vehicle on finance, you’ll recognize the process because it works in the same way. When buying the equipment, you pay the amount back over several years. Since the equipment itself acts as collateral, most lenders can keep interest rates quite low. Naturally, this does mean that you’ll lose the equipment if you fail to meet repayments. Assuming you stick to the monthly payments, the equipment belongs to the business and is yours once the contract is over.

On the other hand, those who aren’t worried about owning the equipment might consider leasing. You’ll pay a monthly fee to use the equipment, but it doesn’t ever belong to the business. If you stop paying, you’ll lose the equipment.

LLC Merchant Cash Advance

Finally, a merchant cash advance could also help the business just as we saw with invoice financing. After borrowing an amount, you promise a percentage of all future sales to the lender. Typically, these are ideal for restaurants, retailers, and other businesses that take large amounts of credit cards sales. After borrowing the amount, the agreed percentage of all future sales goes straight to the lender. If you choose this option, make sure you’re aware of the fees and interest rates to avoid a nasty surprise.

Getting an LLC Loan with Bad Credit

Hopefully, you aren’t so worried about getting a business loan with bad credit any longer. Firstly, we’ve offered other types of LLC loans that could help any business with bad credit. Secondly, we followed up with various types of alternative funding. While a business line of credit provides access to funds whenever they’re required, invoice financing allows you to collect all invoices before the clients actually settle.

When choosing a path, consider the needs of the business. Also, contact the South Florida Funding Group for tailored advice. After speaking to our professionals, you’ll have a better idea of how each method will affect your business in the short term and long term. Why not get the funds that your LLC business needs today?