Before you apply for a loan, here’s one of the most important things to understand: How your business is structured — legally — matters.
Whether you’re operating, your business structure, plays a major role in how The Loan Fund reviews and arranges your loan or line of credit.
This isn’t about telling you how to run your business. We’re here to support New Mexico’s small business owners — no matter what legal form your business takes. And, yes, we do provide funding to sole proprietors and startups.
But in order to move forward with a loan request, we need to know exactly how your business is registered — and who is legally responsible for the money being borrowed.
“Your business entity is your birth certificate, your entrance into the business world,” says David Hicks, Director of Lending.
Let’s break down what that means and why it matters when you’re getting #LoanReady.
Business Entities & Structure
There are four types of business entities:
Sole Proprietorship — One person owns the business. There’s no legal separation between the owner and the business — you are the business.
- It’s the easiest to start.
- You are personally responsible for all debts and liabilities.
- Business license registration is needed with the city or county you’re operating in and registration is needed with the New Mexico Tax and Revenue Department.
- View this as: “It’s just you running the show.”
Partnership — Two or more people own the business together.
- They share profits, responsibilities, and legal obligations.
- Simple to set up with a partner.
- Each partner can be personally liable.
- Business license registration is needed with the city or county you’re operating in, the New Mexico Tax and Revenue Department, and depending on the type of partnership, registration may be required by the Secretary of State.
- View this as: “You and a partner run the business and share everything — including the risks.”
LLC (Limited Liability Company) — A separate legal business structure that protects your personal assets.
- Can have one or more owners (“members”).
- Personal assets are protected.
- More flexible than a corporation.
- Business license registration is needed with the city or county you’re operating in, Secretary of State, and the New Mexico Tax and Revenue Department.
- “Your business and personal life are legally separate — if the business owes money, your house isn’t on the line.”
Corporation — A fully separate legal entity from its owners.
- Often used by larger businesses or those planning to grow.
- Strong liability protection.
- Can raise money by issuing stock.
- More rules, paperwork, and taxes (see above under LLC).
- “The business exists on its own — it can have shareholders, a board, and continues even if you leave.”
Why Your Business Structure Matters to Lenders
In short, the lending institution simply needs to know the legal entity that is borrowing the funds. Your business entity helps us understand a few key things:
- Legal Responsibility
We need to know who’s legally responsible for the loan.
- If you’re a sole proprietor, you personally are liable for the debt.
- If you’re an LLC, the business itself is responsible — not you as an individual.
- A corporation brings yet another legal structure, possibly with shareholders or a board involved.
This legal clarity helps us structure the loan correctly and protect both you and The Loan Fund.
- Ownership & Authority
Your paperwork tells us who has the legal authority to sign loan documents on behalf of the business. This avoids confusion and ensures we’re working with the right person — especially if your business has multiple owners, partners, or stakeholders.
- Risk Assessment
Different business structures carry different levels of risk.
- A sole proprietorship does not limit personal liability, meaning your personal assets could be on the line.
- An LLC or corporation, on the other hand, helps separate your personal finances from your business, limiting personal risk.
Knowing your structure helps us accurately assess risk and offer the right kind of loan product for your situation.
- Verification & Compliance
Lenders are required to follow strict federal and state laws. Having official documentation like your Articles of Organization (for an LLC) or Articles of Incorporation (for a corporation) helps us verify your business is legitimate, registered properly, and operating in compliance.
“Your business entity is your birth certificate,
– David Hicks, Director of Lending
your entrance into the business world,”
Being #LoanReady is About Preparation
If you’re applying for a loan, you should be prepared to show your business registration, business license, financial information and other documents listed here.
The bottom line: Your business structure matters because it helps us:
- Know who is borrowing the money.
- Understand who can legally sign for the loan.
- Determine the risk level of your business.
- Ensure everything is compliant and above board.
It’s all about making sure the loan is made to the correct legal party, with the right people signing, and clear accountability in place.
When you’re #LoanReady, it’s easier for us to move your application forward — and for you to get the funding you need to grow.
Please feel free to take a look at our Loan Application Process, or our Frequently Asked Questions to help you get #LoanReady.
