A LLC or S-corp exists as an business entity that exists independently of the owners’ personal credit one of the first questions many business owner will ask is, what is the owner accountability to business liability if the entity was to go under?”
If the business is a LLC or S -corp the business owner is not personally liable for the business debt unless the owner personally guaranteed the debt. Most lenders will require a business grossing less than 5 millions annually to personally guarantee a business loan or unsecured business line of credit. However, if the loan is unsecured the borrower is not required to pledge business or personal assets to secure the debt.
Unsecured loans are very popular for amounts up to $250,000. For loans exceeding $250,000 some form of collateral is usually required by the lender in addition the bank will request the filing of a UUC lien which protects the lender from the sell of any company assets before the loan is paid.
Lending institutions are marketing their products to a slightly different kind of borrower, and make their lending decisions toward business owners that are credit-worthy and interested in long term business relationships. Banks are very careful to lend their largest sums of money to companies that have existed for a long time and show a reasonable projection of long-term profitability, so that they minimize the chances that the capital they lend out will be paid back. This simple method of selection ensures that the loans that are issued have high owner accountability to business liability.