Commercial Loans and Banks 20% Owner Rule in LLCs

[CW Clark]

Hi There,

I have gotten commercial loans before, but currently going for one with an investor partner in my LLC on a six-plex. Our deal was to be 50/50 ownership and cash flow split, but the banks I have talked with have all indicated any owner with more than 20% would need to sign/guarantee the loan, which is not something most investor partners want to do (including this one) and signing on the loan is part of what I offer for my share of ownership and not putting up all the cash.

Looking for your thoughts, if you have encountered this and how you may have solved the issue with your partner. Currently looking at dropping the ownership percent for the partner below 20%, but than in the LLC Operating Agreement, artificially ensuring he gets the same amount of cash flow.

Thanks for any insights you might have.