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Are LLC’s Eligible for SBA Loans?

Aug 2, 2022

Businesses often fail due to a lack of capital or startup money. That’s why business owners don’t hesitate to take out loans from various financial institutions. Sadly, approval rates vary depending on the lender. SmallBizTrends.com highlights that while approval ratings are steadily rising, they’re still relatively low. For instance, the approval rates of big banks stand at 15.3% and for small banks, the number is at 20.9%. Learn about SBA Loans and funding solutions for your LLC.

What’s the point of starting an LLC?

Aside from taking out loans, businesses are also keeping failure at bay by choosing to incorporate as a Limited Liability Companies (LLC) in favor of settling for a sole proprietorship. HowToStartAnLLC.org notes that an LLC can help owners separate their business from their personal assets. Tax flexibility, personal liability protection, minimal compliance paperwork, fewer ownership restrictions, credibility, and a straightforward startup process are also some of the benefits that business owners can get from starting an LLC.

What is an SBA Loan?

LLCs that need financial support can look to look to Small Business Association (SBA) loans to supplement their reserves. This type of loan is partially guaranteed by the government, which then reduces the risk for the lender issuing the loan.

SBA loans are meant to help small businesses with their growth and expansion plans. Compared to traditional bank loans, SBA loans have lower fees and better terms. The partial guarantee by the government, which in some cases can go up to 85% of the loan’s amount, allows the financial institutions to rule out an LLC from being too risky. However, this benefit does come with a caveat: SBA loans require a ton of documentation and are processed slowly. For this reason, most SBA loan applications take at least three to six months before they’re fully processed, approved, and released.

How can my LLC get approved for an SBA loan?

Because of the many perks SBA loans offer, it can be hard for an LLC to qualify for them. The minimum requirements of SBA loans are:

  •   More than two years of business history
  •   A personal credit score of 640 or above for the business owner
  •   The business must have an annual revenue of $100,000 or more

To raise the chances of being approved for an SBA loan, Business News Daily advises that business owners should apply through their local bank. Doing this it allows businesses to get immediate access to the SBA since banks often have a designated employee who directly works with the agency.

Another way to get approved for an SBA loan is by going to the nearest Small Business Development Center as they can help match LLCs with the right lender. In addition, Small Business Development Centers also have plenty of resources and services that can help LLC owners, such as disaster recovery assistance, market research help, and financial packaging assistance.

Business owners should also make sure that they’re applying with the right SBA-approved financial institution. In the event that they get rejected by their local banks or don’t receive help from the Small Business Development Center, business owners can use the online tool called Lender Match, which will partner them with an SBA-approved lender. To make this experience easier, businesses should prepare requirements such as a business plan, an outline of credit history, financial projections, and collateral.

So are LLCs Eligible for SBA Loans?

Put simply, yes. But LLC owners might find the process to be too tedious and long. For business owners who are waiting to be approved for their SBA loans but need are in immediate need of funding, they can try cash advance services such as the one we offer here at Reliant. The Merchant Cash Advances we offer have a streamlined cash application and can be used to make up for any urgent costs an LLC needs. Feel free to contact us here to learn more about our services.


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