How to get LLC Loan in Chicago IL

Question

Hey Bigger Pockets!

Hope you all are doing well!

I have spoken to several banks in the local Chicago area about loans for LLCs.  Anything residential will have to be a personal loan and only commercial can be given a loan for an LLC however because my partner and I do not have past experience in the field commercial loans are not available either.

Is there a bank/investors in the area you know of that will provide both commercial and residential to a "relatively" new started LLC?

Both my partner and I have 760+ credit and together make over 200k a year. Ultimately our goal is to not have to do a personal loan under a insurance umbrella and have a multifamily real estate property under our LLC for protection purposes.

Scott Krone · Answer

@Colton Reid howard  I am confused if your loan request was for a SFR or a MFR.  MFR is typically considered commercial by most Chicago lenders.  We are based out of Chicago, and have used Chicago area lenders for all our SFR as well as commercial properties all under LLC's.  I would suggest a smaller local bank that you can build a relationship with.  It may be a matter of how much equity you have in the deal, or your personal guarantee.  If you need a stronger guarantee, then perhaps consider partnering with someone who can assist in that or experience.  Another suggestion would be to have your team, broker, architect, builder all lined up and promote the team to your potential lender.  It is all about risk management.

Eric M. · Answer

Typically you need a track record of revenues for the LLC. I have gotten loans without personal guarantees for my "regular" business that is an LLC but never for REI in my other LLC. It is much more difficult. You essentially need to build the credit of the LLC just like you do for a person and make the LLC look like a regular business with regular income.

Most part time REI's can't really do that. The revenues are too irregular. But you can start by getting a credit card in the LLC name. That will take personal guarantee too but you start building. Once you have a property then go take out a small rehab loan in the LLC name even if you don't need the money. Just take 10 or 20K. Then pay it back. Build it up. Down the road, you may be able to qualify.

If you have taken hard money or private loans, ask those lenders to "report" to credit bureaus.

And always go talk to the smallest, most local bank.

Colton Reid howard · Answer

Thank you Kevin! The "due on sale" clause was definitely a concern for my partner and I to loan from national banks. This is great info to know!  This definitely helps.

Kevin Romines · Answer

You can do a residential loan in your personal name via a Fannie Mae loan and when done, transfer it to your LLC that you are the majority member of. This will not trigger the due on sale clause as Fannie Mae changed their rules on that a year ago to now allow that?

Alternatively you can do a portfolio or Non-QM loan, these loans are designed to be in the LLC's name but require a personal guarantee. The loans are a bit higher on the rate than a Fannie Mae loan, but their designed for that purpose.

Most loans don't require you to have had some rental property management experience, although some loans require 6 months experience? The experience can be outside the LLC, just that you have the experience that you can document in some  way on those deals.

I hope this helps?

Tom Shallcross · Answer

@Colton Reid howard.  I can't help you on the commercial side, but the mortgage broker I use at Key Mortgage Services can do residential loans in your LLC's name while qualifying you based on your personal attributes (credit, employment, DTI...etc).

Feel free to DM me if you'd like his contact.