Can a sole proprietorship LLC apply for a loan?
My LLC is solvent, but not liquid. I regularly cover business bills with my personal credit card while waiting for payments to process. I pay my freelancers out of pocket. I always end up back in the black within a month, but it's sometimes alarming to me when large expenses loom or payroll isn't ready.
As a sole proprietor, am I able to apply for payroll loans or business loans? What are the restrictions on this?
Answers ( 1 )
https://fundsnetservices.com/can-llc-borrow-money-from-bank
Yes, an LLC can borrow money from a bank to fund their business however, there are a few things to know before putting in your application.
Loans are a great way to help small business get through any cash-flow challenges, but loans should make sense and be realistic to avoid any future liability.
1. Decide where you want to borrow money from
Getting a bank loan is often the first place that LLC owners look for funding. But before you rush to get a bank loan, you should consider other funding options such as credit unions, savings and loans, or even private individuals.
2. Consider the Liability.
Even though LLCs provide personal liability protection to its owners/members, many banks still require a resolution and promissory note by the LLC when they are borrowing money. Because LLC members cannot be personally liable for the LLCs debts or defaults, lenders will require a personal guarantee when lending to an LLC. Furthermore, the loan must be reasonable, or the IRS may rule it as additional capital contributions. When considering a bank loan, always look at the liability in case you can no longer make payments or default on the loan. You will want to make sure you fully understand the loan terms, payment rate and interest rate to make sure it is reasonable and something that you can pay back.
While loans are a great way to help a growing business meet their cash flow challenges, it can also bring on more risk and liability, should the LLC default on the loan.