How to show proof of funds as an LLC

Question

My partner has never invested in real estate through an LLC.  He's pretty much an old loan wolf.  He posed a great question to me that I wanted to get feedback on here to answer him.  He asked me this:

If we were to purchase bank owned home or attend a foreclosure auction, how would we show proof of funds as an LLC?  Do we all have to put the amount of money we need to purchase the house into that account and have it sitting there while we search for homes?  Or is there some other way we can provide proof of funds to satisfy auction requirements?

His concern, or course, is the cost of money sitting in the account that could be gaining interest in his personal money market account.  Anyone have advice on this process?  Thanks!

Crystal Smith · Answer

If the LLC doesn't have a bank account or very little in the account then what I recommend is your cash offers Include the bank statements of the members of the LLC along with language in the LLC docmentation that shows the members commitment in cash to the operations of the LLC.  Then submit the statements along with the LLC docsumentation showing the commitments with the offer

Fernando Alonso · Answer

It really depends on the bank’s internal rules and the type of sale. Some institutions want to see the full purchase price sitting in the LLC’s account, while others are satisfied if 80–90% of the funds are clearly liquid and readily transferable. They know the remainder can often be covered through income, other accounts, or quickly liquidating assets.

If your partner owns most or all of the LLC and can document that ownership, then funds in his personal account can sometimes be accepted as proof as well.

And in some cases, you don’t even need to park cash at all. An approved line of credit, documented as immediately available, can serve as proof of funds. In that scenario, it’s best to have a formal agreement drawn up and signed, ideally by an attorney, so it’s professional and credible to the bank or auction officials.