BiggerPockets

Jeff,

Most lenders are staying away from financing real estate related business. So trying to get a LOC based on your LLC will be tough.

However, I have a couple of line of credit products that might work for you. I am posting the info in this forum. Or, you can call or email me directly.

Paula Serber

Thanks for the advice, Richard. I'll follow the path you described.

Yes good idea to start small to start building a credit history.

Yes, possibly, if it isn't expensive. Are you in a position to help?

Banks care about two things for lines of credit. Cash Flow and asset value. Period.

If the cash flow is positive enough to cover the max exposure on the line and the assets are great enough to extinguish the entire line in time of default you shouldn't have a problem lining one up through a local lender. You just need to dig hard enough to find one still doing them near you.

With my clients, i've noticed lenders on lines of credit increasing security requirements. For example last year we were doing lines for builder/developers, unsecured, upto $750k just by showing last three years financials.

Past few months, on the turnover of those same lines, the lenders are coming back looking for personal and business guarantees, plus a pledge of assets at 125% of the line (we used stock), and they were limiting the cash out on the line to 60% of the line limit. On top of that, they were asking the developers to identify particular pieces of property for which they were using the lines, and the lenders were asking to take subordinate liens on those properties too. That meant for a $100k line, they wanted a lien on the property in second or third position, and they wanted a pledge of stock worth $125k, They client didn't have to liquidate the stock, just pledge it to the bank, which meant they couldn't sell the stock personally until the bank released the lien on it. However, if the client defaults, the bank can sell the stock. UNfortunately, that has happened to a few clients who got behind on these deals.

They're being over conservative and way over collateralizing right now. Try the credit unions first. It can be worth jumping through their documentation hoops just to get these lines.