LLC Business Loan Guide — SBA 7(a), 504, Line of Credit, MCA, and Equipment Financing (2026)

Before you start

What to know first

An LLC is a fundable legal entity — lenders view LLCs as more creditworthy than sole proprietorships because of the formal legal structure, separate EIN, and liability separation.
Most business lenders require the LLC to have a minimum time in business (6 months–2 years depending on lender and product) before approving financing — startup LLCs with under 6 months of operating history have very limited conventional options.
Personal credit score of the LLC's members and owners is a primary underwriting factor for most small business loans under $1M — a personal credit score of 650+ is the typical minimum; 700+ qualifies for better rates.
Business credit separate from personal credit is established through the LLC's EIN — Dun & Bradstreet PAYDEX, Experian Intelliscore Plus, and Equifax Business scores affect commercial lending eligibility, especially for lines of credit and larger loans.
SBA loans require a personal guarantee from any owner with 20% or more ownership interest — the LLC's liability shield does not protect owners from SBA loan obligations they personally guaranteed.
Revenue documentation (bank statements, tax returns, P&L statements) is required for most loans — lenders verify that the LLC has sufficient cash flow to service the debt (typically 1.25x debt service coverage ratio).
Collateral may be required for SBA 7(a) loans over $25,000 and most conventional term loans — the LLC's business assets (equipment, real estate, receivables) are the first lien; personal assets may be required as additional collateral if business assets are insufficient.
A merchant cash advance (MCA) is not technically a loan — it is an advance against future sales. MCAs do not require good credit and fund quickly but carry very high effective interest rates (50–350% APR equivalent) and should be used only as a last resort.

Documents

What you'll need

LLC legal name and EIN — required for all applications
Business bank statements — typically 3–6 months; lenders verify revenue and average daily balance
Business tax returns — 2 years of LLC federal returns (Form 1065 or Schedule C) for SBA loans and bank loans
Personal tax returns — 2–3 years of personal returns (Form 1040) for all members with 20%+ ownership
Profit and loss statement — current-year P&L (year-to-date) and prior year annual P&L; may be prepared internally or by CPA
Balance sheet — current assets, liabilities, and equity; required for SBA and most conventional bank loans
Personal financial statement (SBA Form 413) — for all 20%+ owners applying for SBA loans
Articles of Organization / Certificate of Formation — proves the LLC exists and is in good standing
Operating agreement — required by most lenders to confirm ownership percentages and signing authority
Collateral documentation — if applicable: real estate appraisal, equipment list with values, accounts receivable aging
Business plan — required for SBA startup loans and some conventional loans for businesses under 2 years old
Certificate of Good Standing — from your state SOS, confirming the LLC is active and in good standing (required by SBA and most bank lenders)

Process

Step by step

Match your financing need to the right loan product Business loan products serve different purposes — matching the need to the product determines rate, approval odds, and repayment structure. Key matching rules: Working capital or general operations: business line of credit (revolving, interest only on outstanding balance) or SBA 7(a) term loan. Purchasing commercial real estate or major equipment: SBA 504 (best terms) or equipment financing (faster). Short-term cash flow gap: business line of credit (Bluevine, Fundbox) or, as a last resort, merchant cash advance. Emergency bridge financing: MCA or short-term online lender (OnDeck). Startup (under 6 months in business): equipment financing (asset-backed), SBA Microloan ($50,000 max for businesses under 2 years), or CDFI lenders (Community Development Financial Institutions). Equipment purchase: equipment financing (up to 100% of equipment value, equipment is collateral) or SBA 504 for major machinery. Matching the product to the purpose prevents paying for expensive capital (MCA) when cheaper options (LOC, SBA) are available.
Understand lender qualification requirements Each loan product has minimum qualification thresholds. Use this as a pre-qualification checklist: SBA 7(a) and 504: minimum 2 years in business (most participating lenders), 680+ personal credit score (preferred), positive cash flow, collateral for loans over $25,000, personal guarantee from all 20%+ owners, no recent bankruptcies (typically 7-year lookback). Business term loan (conventional bank): 2+ years in business, 680+ personal credit, $250,000+ annual revenue for most programs, collateral typically required. Online term lender (OnDeck, Lendio partners): 1+ year in business, 625+ personal credit, $100,000+ annual revenue, no open liens or recent bankruptcies. Business line of credit (Bluevine, Fundbox): 6+ months in business, 625–640+ personal credit, $50,000–$100,000+ annual revenue. Equipment financing: 6+ months in business, 600+ personal credit (some lenders go to 575), no collateral required beyond the equipment itself. MCA: 3+ months in business, $10,000+/month in credit card or bank deposits, no minimum credit score (but FICO is reviewed). The biggest disqualifiers across all products: federal tax liens, recent bankruptcies (within 1–3 years for most lenders), open fraud or financial crime judgments, and severely negative cash flow.
Build or improve your LLC's credit profile before applying Your LLC's credit profile determines both eligibility and rate. Actions that meaningfully improve your position: (1) Establish a separate business credit profile with Dun & Bradstreet: register for a D-U-N-S Number (free at dnb.com) and begin building trade lines. Business credit bureaus score on payment history with vendors and suppliers — not personal credit. Net-30 vendor accounts (Uline, Quill, Grainger) are the fastest way to build early trade lines. (2) Open a dedicated business bank account under the LLC's EIN if you haven't already — lenders look for 6–12+ months of business banking history. (3) Pay all business obligations on time or early — MCA repayments, credit card balances, and vendor invoices all affect business credit bureau scores. (4) Reduce personal credit utilization below 30% — your personal score directly affects SBA and conventional loan rates. (5) File all required state annual reports and maintain good standing — lenders verify this with a Certificate of Good Standing. (6) Resolve any outstanding tax liens or judgments — these are the fastest disqualifiers.
Prepare your financial documentation package Strong documentation reduces friction and accelerates approval. Core documents needed: Business bank statements (last 3–6 months): shows average daily balance, revenue deposits, and cash flow consistency — the single most important document for online lenders. Tax returns (2 years business + personal): lenders adjust gross revenue for non-cash expenses to calculate real cash flow. Avoid submitting returns with large unexplained losses or income spikes without a letter of explanation. P&L and balance sheet: for SBA loans, prepare these with a CPA or bookkeeper — lenders scrutinize accuracy. Personal financial statement: SBA Form 413, required for all SBA loans; discloses personal assets, liabilities, and income. Articles of Organization + Certificate of Good Standing: order the certificate of good standing from your state SOS before starting the application — it costs $5–$25 and lenders require it. Operating agreement: confirms ownership percentages (relevant for personal guarantee requirements) and signing authority. Organize all documents in a lender package before applying — gaps or missing documents are the #1 cause of application delays.
Apply through the right channel — marketplace, direct lender, SBA bank, or CDFI Choosing the right application channel saves time and maximizes approval odds: Lendio (marketplace): submit one application, receive multiple offers from 75+ lenders — best for LLCs unsure which product fits. Compares SBA, term loans, LOC, equipment, MCA in one workflow. Fundbox: online LOC specialist; 3 months business bank history required; instant decision; no hard credit pull for initial check. Bluevine: LOC and checking account; 6 months in business; decision in minutes; widely used by service businesses and contractors. OnDeck: fast term loans and LOC; 1 year minimum in business; same-day funding for qualified borrowers. SBA preferred lenders: for SBA 7(a) loans, apply through SBA Preferred Lenders (Wells Fargo, JPMorgan, Live Oak Bank, Huntington Bank) — they have delegated authority to approve SBA loans without routing through the SBA, cutting approval time from weeks to days. CDFI lenders: for underserved communities, minority-owned businesses, or startups; mission-driven lenders with more flexible underwriting. Find a CDFI at cdfifund.gov/programs-training/Programs/cdfi-program.
Evaluate loan offers — APR, term, covenants, and prepayment penalties When comparing multiple offers, look beyond the interest rate: (1) APR (Annual Percentage Rate): includes interest + all fees + origination costs; the true cost of the loan. Always ask for APR — some lenders advertise factor rates or 'simple interest' to obscure the real cost. (2) Loan term: longer terms reduce monthly payments but increase total interest paid. SBA 7(a) terms: up to 10 years for working capital, 25 years for real estate. Shorter terms (12–36 months) are typical for online lenders. (3) Repayment structure: daily or weekly automatic deductions (MCA, some online lenders) are cash-flow-intensive and reduce flexibility. Monthly payments (SBA, conventional bank) are less disruptive. (4) Covenants: SBA loans and bank loans often include financial covenants (minimum DSCR, maximum leverage ratio) that can trigger default if violated. (5) Prepayment penalties: SBA 7(a) loans with terms of 15+ years carry prepayment penalties for the first 3 years (5%, 3%, 1%). Most online lenders allow prepayment without penalty. (6) Personal guarantee scope: confirm whether the guarantee is limited (capped at loan amount) or unlimited (covers all LLC obligations to the lender) — this matters enormously for multi-member LLCs.
Use the loan proceeds strategically and manage debt service Taking on business debt is a leverage decision — use the proceeds for investments that generate returns exceeding the cost of capital: hiring revenue-generating staff, purchasing equipment that reduces operating costs, expanding into markets with proven demand, or acquiring inventory ahead of a seasonal revenue spike. Avoid using business debt for: owner distributions, covering operating losses with no plan for improvement, speculative investments, or purchases that don't generate a return. Debt service management: set up automatic loan payments from the business bank account; model the debt service into your monthly cash flow projections; maintain a cash reserve of 2–3 months of loan payments for coverage during slow periods. For SBA loans: maintain the required bank accounts at the lending institution (many SBA lenders require a depository relationship), provide annual financial statements on time, and avoid triggering financial covenant violations — report proactively if financial difficulties arise rather than waiting for the lender to discover them.

Costs

What it costs

Item	Amount	Notes
SBA 7(a) loan — guarantee fee	0%–3.5% of guaranteed portion	The SBA charges a guarantee fee on the guaranteed portion of the loan (typically 75–85% of the loan amount). Fee structure for 2024–2025: loans up to $150,000 — 2%; $150,001–$700,000 — 3%; $700,001–$5M — 3.5%. The fee is typically financed into the loan. SBA waives fees for loans up to $150,000 to veterans. Total cost of funds: 6–11% APR depending on amount, term, and prime rate.
SBA 504 loan — CDC debenture fee	2%–3% of CDC portion	SBA 504 loans are structured as two loans: a conventional bank loan (50% of project) + a CDC/SBA debenture (40%) + borrower equity (10%). The CDC portion carries fees of approximately 2–3%. 504 loans are designed for fixed assets: commercial real estate and major equipment. Maximum: $5.5M per project ($5M for most, $16.5M for eligible energy-efficiency projects).
Business term loan — origination fee	0%–5% of loan amount	Non-SBA term loans from banks, credit unions, and online lenders charge origination fees of 0–5%. Online lenders (OnDeck, Fundbox) typically charge 0–3%. APR range: 7–45% depending on creditworthiness, time in business, and revenue. Loan amounts: $10,000–$500,000 for online lenders; $50,000–$2M+ for banks.
Business line of credit — draw fees and interest	6%–35% APR + 0%–2% draw fees	Revolving credit line — draw as needed, pay interest only on outstanding balance. Bluevine: 6.2%–78% APR, $250,000 maximum, 6 months time in business. Fundbox: 4.66%–8.99% per 12-week period, $150,000 maximum, 3 months in business. OnDeck: 35.9%+ APR, $100,000 maximum. Bank lines of credit: 7–12% APR with 2-year minimum in business.
Merchant cash advance (MCA) — factor rate	1.1–1.5x factor rate (50–350% APR equivalent)	An MCA advances a lump sum against future credit card or bank receivables in exchange for a fixed payback amount (advance × factor rate). Example: $50,000 advance × 1.3 factor = $65,000 repayment. Repaid via daily or weekly automatic deductions from business bank account (10–20% of daily revenue). Extremely expensive — use only for emergency bridge financing when no other option exists.
Equipment financing — interest rate	4%–20% APR	Equipment loans finance the purchase of business equipment (machinery, vehicles, computers, restaurant equipment) with the equipment itself as collateral. Loan amounts up to 100% of equipment value. Terms: 2–7 years. Startup-friendly: some equipment lenders (Crest Capital, Balboa Capital) approve LLCs with 6+ months in business and 600+ personal credit score. SBA 504 is the gold standard for large equipment purchases.
SBA Express loan	Up to $500,000 at 6–12% APR	Faster SBA decision (36-hour turnaround vs. 5–10 days for standard 7(a)). 50% SBA guarantee (vs. 75–85% for standard 7(a)). Maximum $500,000. Good for LLCs that qualify for SBA but need faster funding. Available through SBA Express-designated lenders.
Lendio marketplace — comparison shopping	Varies by lender matched	Lendio is a loan marketplace that submits one application to 75+ lenders and returns multiple offers. Free to use — Lendio earns a referral fee from the lender. Useful for LLCs that want to compare SBA, term loans, lines of credit, and equipment financing in one application. $50–$150 affiliate commission per funded loan.

FAQ

Common questions

Can a new LLC get a business loan?

Yes, but options are limited for LLCs under 6 months old. Most conventional lenders and SBA programs require 1–2 years of operating history and tax returns. Options for newer LLCs: (1) SBA Microloan — up to $50,000 through non-profit intermediaries; startup-friendly but requires a business plan. (2) Equipment financing — the equipment itself is the collateral; some lenders approve LLCs with 3–6 months of history and 600+ personal credit. (3) Business credit cards — available immediately with a new LLC EIN; often the first business credit product available. (4) CDFI lenders — mission-driven lenders in underserved communities with more flexible underwriting for startups. (5) Revenue-based financing / MCA — available after 3 months with $10,000+/month in deposits, but extremely expensive. Best strategy: form the LLC, open a business bank account, run all revenue through it, build 6–12 months of bank statements, and apply for a real loan rather than relying on expensive bridge financing.

What credit score do I need to get an LLC business loan?

Required credit scores by product: SBA 7(a): 680+ personal FICO preferred (some lenders accept 650+); higher scores get better rates. Conventional bank term loan: 680–700+ preferred. Online term lender (OnDeck): 625+ personal credit. Business line of credit (Bluevine): 640+; (Fundbox): 600+. Equipment financing: 600–620+ (some lenders accept lower for strong equipment collateral). Merchant cash advance: no minimum — but MCA rates are so high that credit score is not a meaningful savings lever. Business credit score (PAYDEX): Separate from personal credit and takes time to build. Lenders using business credit primarily: Uline-style vendor accounts, certain commercial real estate lenders, and larger LOC programs above $250,000. Both personal and business credit matter for most business lending — personal FICO drives the initial approval decision; business credit determines available limits and terms as the relationship matures.

What is an SBA loan and how does it work?

SBA loans are not loans made directly by the government — the SBA (Small Business Administration) guarantees a portion of a loan made by a private lender (bank, credit union, or non-bank lender). This guarantee reduces the lender's risk, allowing them to offer lower rates and longer terms than they would otherwise. How it works: you apply through an SBA-participating lender; the lender underwrites the loan per SBA guidelines; the SBA reviews and issues a guarantee (75–85% of the loan amount for 7(a)); the lender funds the loan; the SBA collects a guarantee fee (rolled into the loan). The SBA's guarantee means: lower rates (prime + 2.25–4.75%), longer terms (up to 25 years for real estate), and lower down payment requirements (typically 10%) compared to conventional commercial loans. The trade-off: more paperwork, longer approval timelines, required personal guarantee from all 20%+ owners, and collateral requirements.

What is the difference between a term loan and a line of credit for an LLC?

Term loan: you borrow a fixed lump sum, receive it at closing, and repay it in fixed monthly installments over a defined term (1–25 years). Interest is charged on the full outstanding balance. Best for: one-time capital needs — equipment purchase, business acquisition, leasehold improvements, working capital infusion. Line of credit (LOC): a revolving credit facility with a maximum limit. Draw cash as needed, up to the limit; repay the drawn amount; credit becomes available again. Interest is charged only on the outstanding balance, not the full limit. Best for: ongoing cash flow management, covering payroll or inventory gaps between receivables, seasonal fluctuations. Cost comparison: LOCs often have higher rates than term loans but cost less in total interest if you don't use the full facility. A $100,000 LOC at 18% where you only draw $20,000 for 30 days costs you $300 in interest — far cheaper than a $100,000 term loan at 8% for 5 years ($21,600 in total interest).

What is a merchant cash advance (MCA) and when should an LLC use one?

A merchant cash advance is not a loan — it is a purchase of future receivables. The MCA provider advances a lump sum and automatically collects a fixed percentage of daily or weekly revenue until the full repayment amount (advance × factor rate) is collected. Example: $50,000 advance × 1.35 factor = $67,500 total repayment, collected at 15% of daily bank deposits. The effective APR equivalent of an MCA ranges from 50% to 350+%, making it the most expensive form of business financing. MCAs are appropriate only when: (1) No other financing option is available (poor credit, too-new business, collections/liens blocking conventional lending). (2) The need is truly urgent and short-term (emergency equipment repair, seasonal inventory spike). (3) The ROI on the use of proceeds clearly exceeds the MCA cost. MCAs should not be used for ongoing working capital, payroll funding, or long-term investments. MCA stacking (taking multiple MCAs simultaneously) is a common path to LLC insolvency.

Does a personal guarantee on an SBA loan void my LLC's liability protection?

The personal guarantee does not void the LLC's liability protection for other creditors — but it does make you personally liable to the SBA lender for the specific guaranteed obligation. The LLC's liability shield protects your personal assets from the LLC's debts when those debts are the LLC's alone. When you personally guarantee a debt, you have contractually waived that protection for that specific obligation. SBA policy: all owners with 20%+ ownership must personally guarantee SBA loans. This is non-negotiable for SBA programs. What the guarantee means: if the LLC defaults, the lender can sue you personally and pursue your personal assets (home equity, personal savings, personal bank accounts). Before signing any personal guarantee: understand the scope (unlimited vs. limited guarantee), the term (does the guarantee expire?), and the collateral provisions. Some lenders accept a limited personal guarantee (capped at the loan amount) — negotiate this if possible, particularly for larger loans.

What are the SBA 7(a) and SBA 504 loan programs and how are they different?

SBA 7(a) and SBA 504 serve different purposes: SBA 7(a): the general-purpose SBA loan. Use for: working capital, equipment, real estate, business acquisition, leasehold improvements, refinancing existing business debt. Maximum: $5M. Terms: up to 10 years (working capital), 25 years (real estate). Interest rate: prime + 2.25–4.75% (variable, tied to WSJ Prime Rate). Structure: single loan from one lender, SBA guarantees 75–85%. SBA 504: specifically for fixed assets (commercial real estate and major equipment) that the LLC will use as its primary place of business. Cannot be used for working capital, inventory, or business acquisition of non-real-estate assets. Structure: three-party — 50% conventional bank loan + 40% CDC/SBA debenture + 10% borrower equity. Maximum CDC portion: $5.5M. Interest rate on CDC portion: fixed, tied to 10-year Treasury rate (typically 5–6%). Best rate available for commercial real estate. Why choose 504 over 7(a) for real estate: lower interest rate on the CDC portion (fixed vs. variable), lower down payment (10% vs. typically 15–25% for conventional commercial real estate), and longer-term fixed rate certainty.

How does Lendio work for LLC business loans?

Lendio is a business loan marketplace — not a direct lender. You complete one application, and Lendio submits it to their network of 75+ lenders, including SBA banks, OnDeck, Fundbox, Bluevine, Funding Circle, Kabbage, and others. Within 24–72 hours, you receive multiple loan offers across different products (SBA, term, LOC, equipment) and can compare them side by side. Lendio earns a referral fee from the lender when a loan funds — you pay nothing directly to Lendio. The advantage: one application, multiple offers, no guesswork about which lender to approach. The limitation: Lendio is a lead generator, not an underwriter — the actual loan terms are set by the participating lender who funds your application. For LLCs with strong qualifications and a specific product in mind (e.g., SBA 7(a) through Live Oak Bank), going directly to the lender is more efficient. For LLCs unsure which product or lender fits best, Lendio's comparison process is valuable.

Provenance

Legal basis & official sources

Last verified 2026-05-07.

SBA loan programs are authorized under the Small Business Act, 15 U.S.C. § 631 et seq. SBA 7(a) program: 15 U.S.C. § 636(a). SBA 504/CDC program: 15 U.S.C. § 695–696. SBA Express: 15 U.S.C. § 636(a)(31). SBA Microloan: 15 U.S.C. § 636(m). Federal lending regulations: Equal Credit Opportunity Act (ECOA), 15 U.S.C. § 1691; Truth in Lending Act (TILA), 15 U.S.C. § 1601 (note: TILA does not apply to business loans, but some states have enacted business lending disclosure laws); Commercial lending disclosure laws: CA SB 1235 (California), NY Senate Bill S5470 (New York) — these states require APR disclosure on business loans. UCC Article 9 governs security interests (collateral) in business assets.

Direct filing portal: https://www.sba.gov/funding-programs/loans/7a-loans

If you skip this

Undercapitalized LLCs that cannot fund growth opportunities lose market share to better-capitalized competitors
Using personal credit cards or personal loans to fund business expenses blurs the LLC-personal separation and risks piercing the corporate veil
Merchant cash advances used repeatedly become a debt trap — high factor rates and daily deductions can deplete working capital faster than revenue replenishes it
Failing to build business credit while relying solely on personal credit leaves the LLC unable to qualify for business-only financing as it scales beyond the personal credit limit
SBA personal guarantees that are not fully understood at signing can expose the business owner's personal assets (home, savings) if the LLC defaults — the LLC liability shield does not protect against SBA personal guarantees

Official sources

§ A Related guides

§ B Building permits

§ C Companion tools

Disclaimer: Informational only, not legal or tax advice. Rules change, so confirm with a business attorney or CPA before you act.