Southern NJ Small Business Loan vs LOC?

4 Replies

What are my pros/cons of using a small business loan vs loc?  Up until this point we have used private money and hard money to fund our deals.  We have fix/flipped approx 20 homes so have a strong track record of success.  Would obviously prefer unsecured as we only hold onto the properties for approx 90-120 days so they are not long term tangible assets to loan against.  

Hi @Ray Masciangelo

I would say a line of credit would be best. It is definitely more versatile and can be considered cash when making an offer. You get to reuse it over and over again where as with a loan you do not. Of course like you said you might have to secure the line of credit. with the ability to have "cash" available to me is worth it.

I am interested to hear what other people have to say.

William Lees Jr

Thanks @William Lees I have heard similar information about the versatility of the LOC. Hoping to hear some additional input from lenders and other investors!

@Ray Masciangelo  With a line of credit you only pay fees once and you can use it over and over again.  For short term projects this really seems like the best option if it's available to you.  With a loan you take the money out and you only have that set amount of money.  Once you pay it back you can't borrow it again without restarting the process to take out a loan.  With all other things being equal the line of credit is the way to go.  Now, if the loan has substantially better terms or will allow you to borrow substantially more than the line of credit you will have to weigh the pros and cons.

Thanks @Stephanie Irto It seems the LOC is the more favorable of the 2 options. Is it true that typically the local community banks are more open to working with a small business?

Join the Largest Real Estate Investing Community

Basic membership is free, forever.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.