Updated about 10 years ago on . Most recent reply
Lender wants us to modify ownship interest. Should we?
We have an LLC in which I and my partner have 50/50 ownership. We are applying for a blanket loan which will refi 9 single family homes. My partner's credit has some dings on it and is fairly low. The lender is saying that they will write the loan provided that we reduce his interest in the LLC to 20% or less.
So my question is, what are the implications of doing this? Any feedback would be greatly appreciated. Thanks!
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#2 All Forums Contributor
- Real Estate Broker
- Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH
Banks usually require a personal guarantee from all members with 20%+ ownership stake in the LLC. Taking the credit poor partner down eliminates his credit from being a hurdle to get the loan.
This is really something that is between you and your partner. How well do you know each other? Trust each other? Willing to do a gentleman's agreement or buy him down?