Private Funding for My Business

[Jon Robinson]

Hi, I was recently offered from a client/friend a generous amount of capital for the next 5 years at a great rate to invest. These funds will primarily be used at my discretion for acquisitions as I scale my business. I currently have a successful real estate investment business that is essentially a portfolio of STR/LTR rentals that I hold under my LLC. The LLC consist of just my wife and I owning 50% , and my 2 children as 25% each. What is the best way to write up the paper for this debt, would it just be unsecured debt, how could I secure it without changing the ownership structure of the LLC?

[Ned Carey]

@Jon Robinson

You don't need to do anything to change the "the ownership structure" of your LLC. As long as the other members of the LLC go along with the loan. Your LLC operating agreement should specify who and how things like loans are voted on.

Regarding making the Note more valuable to your lender, absolutely it should be a secured loan. A note secured by a UCC filing is probably not as saleable as a mortgage note. Fewer people are familiar with UCC filings, while mortgages are actively sought in the secondary market. The more collateral the better. The collateral should have more value than the face value of the note.  In addition to collateral having the note personally guaranteed makes it more valuable, lastly a record of timely payments makes it more saleable. 

If you lender wants to sell the note after two months, he or she has little payment history. Once a note is "Seasoned" for a year or two then it becomes easier to sell. 

     "but please if you have no positive input please refrain from commenting again."

I am not sure why you think I have not provided any positive comment. I have answered your questions. If you don't make yourself clear with your questions then it is hard for people to understand what perspective you are coming from.  I also answer questions not just for your benefit but for others reading along.