Unsecured Business Line of Credit and Your Credit Score

2 Replies

I have a small business and my bank offered me an unsecured line of credit of 60k at 5% with no annual fee.  I already have a home equity line of 180k at 5.5% that I'm not using.  My small business does pretty good and I have decent amount of cash on hand, but I'm looking to start investing in real estate and don't quite know what strategies I'm going to do yet and don't know how much money I will end up needing.  

If I go with the line of credit does my credit take a hit?  I'm a sole proprietor so I'm not sure if my personal will be linked to the business line of credit.

your credit will not take a hit as long as you make the payments. But if you go to qualify and they ask for your SS# then yes, it's going to be there on your bureau. 

Too many outstanding high balances can affect your credit score. The terms that your bank is offering are pretty good. Must be a small bank perhaps. Too many enquiries can hurt you too. But that's probably a moot point. 

I'm always slightly amused when somebody asks about how much $$ will they need to invest in RE. What makes you think you need any money, or credit, for that matter to invest? Well at least that will get you thinking. LOL. 

That's one of the problems I have with this forum. Well meaning folks, who try to give you good advice. As you and I are successful business people, sometimes you have to think creatively in order to find the best way. There are massive dangers investing in RE by giving personal guarantees, by letting banks get involved in your business. But folks on here do it all the time, and the so called knowledgeable people encourage it. It's the herd effect. 

That's all I have to say on the topic. As you can tell, I don't follow the crowd. I've learned thru the school of hard knocks. But I know some very experienced and very wealthy folks who would say the same thing. I'm just glad I'm amongst good company.

Good luck. 

Thanks for the advice Chris!

The bank is Wells Fargo so not too small.  I really don't need the money or even know what I'd do with the money.  I'm thinking about buy and hold's and multi's but I've gone to a couple of court house steps auctions where I was the only guy there but didn't raise my hand because I was too scared.  On 2 of them If I would've pulled the trigger I probably could've netted about 30k after rehabbing them.  So my thinking is having that reserve available as a just in case wouldn't be such a bad deal if I needed it for a short term flip.  As long as it didn't hurt my credit while trying to obtain a fixed mortgage on a buy and hold that I may want.