Business Line of Credit: Who Should I Talk To?

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Business Line of Credit: Who Should I Talk To?

Mark Dixon
Real Estate Investor · Baltimore, MD · Member since 2009 · 13 posts · 0 votes

I am in the process of establishing my LLC and I am interested in setting up a business line of credit for the corporation. I wanted to ask if anyone here could recommend a bank or financial institution where I could get the best deal?

Thanks in advance!

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Aly W.
Investor · Middletown, NJ · Member since 2008 · 2k+ posts · 1k+ votes
15y
Originally posted by Terri Pour-Rastegar:
I just don't agree that bank financing should be avoided at all costs. Without the equity lines obtained on our first few properties, we wouldn't be able to buy anything today. Our equity lines are set right at prime (one is LESS than prime) and based on a 20-year amortization. They cost us absolutely nothing to obtain (At the time, Wachovia seemed to be giving them away). They are secured by the property they're tied to, of course, but who cares? These are long-term rentals.

Work VERY hard to establish a great relationship with a local bank. Make it known that your goal is to earn their respect and obtain financing. Be loyal to them--do all your banking there, go into the bank in person whenever humanly possible so they get to know you personally, etc. Eventually, they will open their hand to you.

Absolutely Terry, it was great to read this, as I do the same. I bank with TD Bank, love them, and know most of the local officers by name. I've given them boxes of chocolate as Thank You gifts and they are always very helpful and pleasant, and go above and beyond.

I also have long term rentals, the HELOCs were $99 for the application fee. The last one was for 3.75%.

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  • Jon Klaus
    Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
    16y

    Chase might give your LLC up to a $50K credit card at a pretty good rate. They just did that for a friend.

    0Reply
  • Mark Dixon
    OP
    Real Estate Investor · Baltimore, MD · Member since 2009 · 13 posts · 0 votes
    16y

    Chase. Cool! Thanks!

    0Reply
  • Bryan Hancock
    Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
    16y

    Lines up to $50k are all underwritten like signature loans from my understanding. Above $50k the covenants and such get a lot more hairy and you will need solid income and financials to pull something down.

    Business Credit Services (BCS) has a great intro program for building business credit and was started by David Gass. An advanced program is offered by The RBSL Group D/B/A Unsecuredline dot com. They have a very comprehensive "scorecard" product that rates how your file looks to an underwriter.

    I have been working on my RBSL scorecard for over a year and have gone from 68.5% to 80.6% based on how I keep score using their formula. I am hoping to make it in the 90th percentile later this year and to pursue a big line next year when the banks don't blanket deny real estate investors because of their industry.

    It is virtually impossible to get a bank line of credit (non-signature...or unsecured) if you are a new real estate customer right now from my experience. Underwriters are told to blanket deny you regardless of how strong your file is.

    1Reply
  • Bryan Hancock
    Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
    15y

    Has anyone been successful getting a business line of credit approved in the last few years? If so, how did you approach things?

    Money seems to be loosening up some in Austin and I was curious if people are seeing the same things elsewhere.

    0Reply
  • Curt DavisBusiness Member
    Flipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
    15y

    There are a few smaller local banks in Memphis were one could get a $50k line fairly easily. Considering doing it myself and lend it out at a higher rate.

    Curt Davis - KAIZEN Realty538 Reviews
    WebsiteView Page
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  • Darryl Dahlen
    Commercial Loan Officer · Southern Maine, ME · Member since 2009 · 782 posts · 415 votes
    15y

    I too am curious as to who is really getting these loans and from whom. The fact Jon knows someone who is getting $50k is a good sign so perhaps Chase is putting some money on the streets via their unsecured lines.

    I know I've talked to more than a few people with stellar credit who couldn't get anything close to $50k on an unsecured line, but that was a few months ago. Things can change quite a bit in that amount of time so it'd be nice to know if any of the big boys are opening up the purse strings on ULOC's.

    0Reply
  • Ed L.
    Residential Real Estate Agent · Hattiesburg, MS · Member since 2011 · 475 posts · 141 votes
    15y
    Originally posted by Bryan Hancock:
    Has anyone been successful getting a business line of credit approved in the last few years? If so, how did you approach things?

    Money seems to be loosening up some in Austin and I was curious if people are seeing the same things elsewhere.

    Was supposed to get a 50K unsecured, but there was a problem in underwriting with the structure of another loan. They gave me 15K and offered to raise it once the other property sold. That was Hancock Bank

    If you are over in East Tx. you might want to try Shelby Savings Bank. My dad has a pretty huge unsecured LOC with them.

    0Reply
  • Bryan Hancock
    Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
    15y

    I'm working on a line right now and the loan committee is giving me strong signals they are going to approve it. I guess we'll see.

    It is just a $75k line, but there is an opportunity to grow it quickly once I get approved for a small line and show I am responsible with it.

    0Reply
  • Jackie Lange
    Investor · Central America, Panama · Member since 2010 · 423 posts · 293 votes
    15y

    DON'T DO IT!!!

    AVOID BANK FINANCING

    It is much better to establish relationships with private lenders who you can borrow from or do a joint venture.

    That's the #1 thing that the Legendary Jack Miller preached - never, ever use bank financing

    Jackie Lange

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  • Bryan Hancock
    Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
    15y

    Well with respect to Jack Jackie bank financing has its place. The debt is cheaper and more plentiful once you start requiring a lot of funding for projects. We use private financing, but it always finds its way into other projects unless you can keep it working constantly.

    We have an equity fund set up for more expensive money. Lines of credit are good for certain things though.

    1Reply
  • Jackie Lange
    Investor · Central America, Panama · Member since 2010 · 423 posts · 293 votes
    15y

    I have dome many hundreds of deals and never, ever used bank financing.

    Every single rental property I own was bought with seller financing.

    The day you start using bank financing, is the day you STOP learning how to buy creatively... with terms or with joint ventures or with private lenders.

    Bank financing debt comes at a MUCH HIGHER price, you are putting personal recourse on the line!! As an investor, that's the worst thing you can do. Bank financing is exactly what got so many investors in to a lot of trouble in the last couple of years, it caused many foreclosures and bankruptcies.

    As Peter Fortunato always says, if you buy with cash or with bank financing/equity lines of credit, you have checked your brain at the door.

    You need to learn to make creative offers and buy with seller financing OR work with private lenders

    I paid 2% for my my last PL loan!! no points, no loan fees, no credit application, no prepayment penalty, no balloons.....try to do that with a bank

    Jackie

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  • Bryan Hancock
    Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
    15y

    Who cares about personal recourse for small deals? I am paying the loan back so it doesn't matter. Non-recourse loans are only suitable for very large transactions where a single poor decision can sink you financially and where you have LPs that don't want to sign personally for debt.

    I know how to buy subject-to, with JVs, etc. You pay more for the projects if you need the seller to finance them. People with capital that doesn't escape to other projects can buy for cash, get the best price, and refinance into long-term money.

    Lines are also suitable for cash flow issues for people that use property managers and pay mortgages prior to collecting rent. They are also suitable for construction projects that are done ad hoc with numerous JV partners that vary from project to project. Construction financing isn't suitable for these types of projects. How do you get the seller to finance these projects?

    0Reply
  • Ed L.
    Residential Real Estate Agent · Hattiesburg, MS · Member since 2011 · 475 posts · 141 votes
    15y

    I really can't see many draw backs to instant available cash @ 4% interest. No yearly fees only pay when it's in play.

    Is there long term fixed private money out there for 4-5%??? If there is I would love to get in on it!

    Most the deals I come across are bank REO. Cash gets you a better deal, and often is the determining factor with multiple offers.

    I do agree that LOC are a bad option for holding properties due to loan calls and principal reductions. That can sink your ship pretty quickly.

    1Reply
  • Bryan Hancock
    Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
    15y

    They are usually tied to prime or some other common index Ed. I am negotiating on mine right now...they want a 5-year amortization and I requested 15. The rate hasn't been mentioned yet, but it was presented in the 5%ish range a few months back when I started the process.

    Access to cheap cash is never a bad thing IMO. I would rather pay 5% with personal recourse than 10% to a private individual without personal recourse...to each their own.

    0Reply
  • Kevin Yeats
    Lender · Fort Pierce, FL · Member since 2009 · 825 posts · 486 votes
    15y

    FWIW, a banker friend of mine outside of Ft. Worth offers LOCs at prime to prime + 3 (currently 3.25% to 6.25%)

    He has a limited market and likes experience and collateral.

    0Reply
  • Ed L.
    Residential Real Estate Agent · Hattiesburg, MS · Member since 2011 · 475 posts · 141 votes
    15y
    Originally posted by Bryan Hancock:
    They are usually tied to prime or some other common index Ed. I am negotiating on mine right now...they want a 5-year amortization and I requested 15. The rate hasn't been mentioned yet, but it was presented in the 5%ish range a few months back when I started the process.

    Access to cheap cash is never a bad thing IMO. I would rather pay 5% with personal recourse than 10% to a private individual without personal recourse...to each their own.

    Same here. I also know the bank isn't going to burn my house down or break my knees if I lose alot of their money lol...

    I believe my LOC is set at prime for the first 3 months and then it's a couple points over prime afterwards. If I recall it was Interest only. Will know when I get my first statement this month.

    I know that's how my dad's are set up.

    Banker brought up a great point. Get the line when you don't need it because it will much harder to get one when there is a actual need.

    0Reply
  • Kevin Yeats
    Lender · Fort Pierce, FL · Member since 2009 · 825 posts · 486 votes
    15y
    Originally posted by Ed Lee:
    Banker brought up a great point. Get the line when you don't need it because it will much harder to get one when there is a actual need.

    Oh so true! and not just with commercial bankers. :D

    1Reply
  • Bryan Hancock
    Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
    15y

    Thanks for the banker contact Kevin...I'll try to call him tomorrow...and you.

    0Reply
  • Michael Seutin
    Real Estate Investor · Vallejo, CA · Member since 2009 · 120 posts · 7 votes
    15y

    I am thinking of approaching a bank for a business line of credit of hopefully 50k, but I ll them as collateral a duplex I bought cash for 25k with repairs (probably worth that much).
    Problem is, I just create my LLC recently and that duplex is the only item in my LLC.
    Do you guys think it will help or work to give them the duplex as collateral in order to get approved?

    0Reply
  • Alisha Lee
    Real Estate Investor · Auburn, CA · Member since 2011 · 11 posts · 2 votes
    15y

    In response to building business credit, I recently started working with a credit broker.

    Before this company had been recommended to me, I personally had never heard of a credit broker but they help you get between $50-$250K in business credit (assuming your credit score is above 680 and you have a legitimate business). Plus, they help you build your business credit lines up for your LLCs or other entities so you don't have to continue always personally guaranteeing loans or lines of credit. Building business credit does take time to build to get your Dunn and Bradstreet paydex score up, but I wish more education was focused around the importance of building business credit that's not personally guaranteed.

    I just started working with them, so I can't recommend them yet, but I certainly wished I would have heard about them 5 years ago when we formed our 2 LLCs.

    0Reply
  • Terri Pour-Rastegar
    Rental Property Investor · Charlotte NC Fort Mill SC Lake Wylie SC, SC · Member since 2009 · 174 posts · 103 votes
    15y

    I just don't agree that bank financing should be avoided at all costs. Without the equity lines obtained on our first few properties, we wouldn't be able to buy anything today. Our equity lines are set right at prime (one is LESS than prime) and based on a 20-year amortization. They cost us absolutely nothing to obtain (At the time, Wachovia seemed to be giving them away). They are secured by the property they're tied to, of course, but who cares? These are long-term rentals.

    When we want to buy a property, we do so with those funds. We make double and triple payments to pay them down quickly. When we flip a property, we use the proceeds to pay off the equity line. Zero debt service sounds like a good idea to me.

    If we had used hard money, our profit margin would have been reduced due to the higher interest. If we'd used seller financing, we would have had to pay more for the property. I don't like either scenario. Of course, access to private/hard money is great to have when you need it.

    As soon as we get our new personal residence re-financed, I'm going after as much bank money as I can get my hands on.

    Bank financing is NOT what got investors in trouble lately. I don't know about anyone else, but before I sign my name to any financing docs, I actually read them. Well before even that, I make sure that I know my finances and my ability to pay back the debt, and I consider all the risks involved. I never over-extend myself or take unnecessary risks. I do everything on a worst-case-scenario basis (i.e., if the market tanks, if I can't find a tenant for 6 months, if I can't sell it and must rent it, will I still be OK? If the answer is no, I do not sign). And I do not do speculative investing. I watched too many people drown because of speculating on the market. Nobody forced anybody to sign loan docs for ridiculous ARMs that would jeopardize a person's finances.

    As for Mark's initial question, if you're really new, it's likely to be hard to get funding in the name of your LLC. That doesn't mean you shouldn't try. Just don't let it discourage you. Work VERY hard to establish a great relationship with a local bank. Make it known that your goal is to earn their respect and obtain financing. Be loyal to them--do all your banking there, go into the bank in person whenever humanly possible so they get to know you personally, etc. Eventually, they will open their hand to you.

    1Reply
  • Michael Power
    Real Estate Investor · Riverview, FL · Member since 2011 · 100 posts · 33 votes
    15y

    Regardless of the commodity you market, or your game plan,...we are in business to make money. You cannot run a business very well without credit of some form. A credit card with $10k-$15k is adequate for most and an unsecured LOC for $50k works very well when you are in a bind.

    Being from Canada, we are learnig very fast how difficult obtaining credit can be for our new entities in Florida. We have personal and company accounts established with BoA and properties valued at $215k in the LLC name, (fully paid up, nothing owing).

    I was in Lewiston, NY last month to acquire credit. My FICO is at 788 and with the equity in the LLC, I felt assured I would not have problems. I received my rejection letter from BoA yesterday. Credit history was non-existant I was told, but could appeal if I write a letter explaining.

    We are too new here. Our plan is to operate like this for 2-years and show we are capable, then try again. We have an excellent business history in Canada but that does us no good as BoA doesn't have access to those assets.

    In the meantime, we've capitalized the LLC and will continue to make loans from ourselves to function.

    @Bryan - thanks for the BCS lead. i'll give them a try.

    @Mark - good luck on your credit quest. By-pass BoA.

    Mike P.

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  • Ali Shah
    Real Estate Investor · Las Vegas, NV · Member since 2008 · 127 posts · 10 votes
    15y

    Now these days most banks even want to see some sort of paper trail for lines of credit under $50k. I have been told even though we are in real estate business, there are loopholes to get approved if the business has been operating for while and of course your personal credit is good. I have heard that Chris Wise was putting these lines of credit of $50k plus together pretty quick, I have not applied with him yet but have a consulting appointment. will report back once it is done and settled on my end.

    0Reply
  • Account Closed
    Private Financing Consultant · Honolulu, HI · Member since 2010 · 132 posts · 27 votes
    15y

    It is always good to have different kinds of credit or cash support line up but choose them wisely at different times to see how they would be beneficial or affect each project.

    With bank loans or signature loans, the terms are usually structured and controlled by the loan provider. With private loans or joint ventures, you may be able to negotiate for something that works for both parties depending on the project that is involved.

    Our company has a private program that offers leverage on client's cash in order to raise capital. The minimum is around $150K to start.

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  • Josh Sterling
    Property Manager · Wyandotte, MI · Member since 2011 · 123 posts · 26 votes
    15y

    Celine,
    Could you email me more information on your program please.

    Thanks,

    -Josh

    [EMAIL REMOVED]

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