Rental Property Investor · Orlando, FL · Member since 2014 · 540 posts · 230 votes
Hey all, I need some creative ideas as it pertains to obtaining a loan as an LLC.
I currently started an LLC and I am looking to obtain a loan for financing deals. None of the members in the LLC would like to put their individual credit on the line to obtain a loan as to not affect their personal credit.
My question is how does the LLC get a loan without affecting any of the members of the LLC? I know the whole It takes two years or so to build the LLC credit and after that the LLC should be able to obtain a loan as an entity. my question is geared towards before we hit that two years of building credit. What are some creative options to achieve that goal sooner?
Investor · Peoria, IL · Member since 2015 · 23 posts · 38 votes
8y
I have 5 mortgages in an LLC in which I am the personal guarantor. None of these accounts show on my personal credit. They have had zero effect on my personal credit score.
Investor · Boston, MA · Member since 2015 · 1k+ posts · 3k+ votes
8y
@Bernadeau C. Look at your question from the bank's perspective.
I walk up and say, "Hi my name's Bill, I just spent a few hundred dollars to set an LLC and I'd like you to give me a loan secured against some property. Oh what happens to me if this deal doesn't work out? Nothing really since I'm not willing to personally guarantee the loan. How likely is it that this deal won't work out? I'v never done anything like this before, so I don't know."
Banks don't do Heads you win, tails they loose.
Can you or your partners deposit some personal cash at the bank, like six figures worth, and pledge that as collateral? Could you act in a GP role and personally guarantee the loan for a higher equity stake?
Guy with Great Hair · Austin, TX · Member since 2013 · 2k+ posts · 4k+ votes
8y
business credit takes a long time and a lot of tradelines for it to be built up. Business credit doesn't look like personal credit. 2 years of tax history allows that income to accounted for, but it won't remove the guarantor requirement. Most commercial loans require guarantors.
@Bill F. is right, think of it from an underwriter perspective: I'm an underwriter for commercial loans and I would be curious why NO PARTY would want to guarantee the loan. Why should the bank take all the risk when you won't?
You can get rid of this requirement through deal history, or buying down the loan extensively.
Rental Property Investor · Orlando, FL · Member since 2014 · 540 posts · 230 votes
8y
I get all the perspective and thanks for sharing; so I can assume that the guarantor requirement is going to stay regardless and there is no avoiding that until we have some "skin" in the game....?
Investor · Peoria, IL · Member since 2015 · 23 posts · 38 votes
8y
I have 5 mortgages in an LLC in which I am the personal guarantor. None of these accounts show on my personal credit. They have had zero effect on my personal credit score.
Real Estate Investor · Burlington, VT · Member since 2010 · 2k+ posts · 1k+ votes
8y
Same for me, most of my commercial loans don't show on my credit report. However, they all required the personal guarantee.
That said, even though they don't show on credit, when applying for new loans, it's still disclosed through the personal financial statement, tax returns, and bank statements.
Cleveland, OH · Member since 2018 · 133 posts · 59 votes
8y
@Bernadeau C. not sure if there is anyone out there that will lend to an LLC without personal guarantee unless company credit is built or you can find someone to partner with you that will serve as guarantor. Or unless you just have a great relationship with the lender that they will just bypass that process and give you money based on the asset.
Lakewood, NJ · Member since 2017 · 16 posts · 9 votes
8y
From my experience,commercial banks
give loans on SFH as long as the monthly rent can cover the mortgage payments. They do not ask for personal information or make you wait a few months until you can refinance.
The interest rate is higher than a local bank etc...
Rental Property Investor · Orlando, FL · Member since 2014 · 540 posts · 230 votes
8y
@Jaymie S. so they have never showed up on your personal credit? how does that work?
@Tom S. that's only for a commercial loan right? so a quad or under would not work. it would have to be a 5 plex or higher?
okay so overall question, I am assuming you cannot get a commercial loan for quad or under; so an LLC buying a quad would show up on the personal credit but a commercial loan (5plex or higher) would not show up but is still needed for the loan.
Hey all, I need some creative ideas as it pertains to obtaining a loan as an LLC.
I currently started an LLC and I am looking to obtain a loan for financing deals. None of the members in the LLC would like to put their individual credit on the line to obtain a loan as to not affect their personal credit.
My question is how does the LLC get a loan without affecting any of the members of the LLC? I know the whole It takes two years or so to build the LLC credit and after that the LLC should be able to obtain a loan as an entity. my question is geared towards before we hit that two years of building credit. What are some creative options to achieve that goal sooner?
Thanks,
A new LLC won't get a loan without personal guarantees.
Rental Property Investor · VA · Member since 2019 · 13 posts · 3 votes
6y
I know that it's supremely important to show that you are not the business and the business is not you, in order to prevent piercing the corporate veil. Doesn't it seem like personally signing for business loans is a problem here? I understand that this is done all the time, but it feels like some other strategy should be used here.
I know that it's supremely important to show that you are not the business and the business is not you, in order to prevent piercing the corporate veil. Doesn't it seem like personally signing for business loans is a problem here? I understand that this is done all the time, but it feels like some other strategy should be used here.
To put it simple, they are still taking out the loan but its just in llc name. You the borrower are personally 100% responsible for the payment, the rates are even based of your credit score. All LLC loans require an operating agreement. In the operating agreement it stats who is responsible who can take out loans, what can be completed.
The fast and short story is some people think this will protect them, but when the lawyers gear up, everyone is sued and everyone will be foreclosed on if it goes south.
Investor · Johns Creek, GA · Member since 2017 · 463 posts · 488 votes
6y
Here's what I have done. Non-recourse seller financing loan - Assign contract to entity during due diligence. I am in mobile home parks which might be different from other asset classes.
LLC Loan: Documents insisting on waiving rights (state: PA)
Loan documents I am being asked to complete require signing away many rights. Lender is stating this is standard language (purchased standard form etc.LaserPro, Ver. 20.2.20.003) Basically sign away the enclosed rights or we do not furnish the loan.
Waives include: - right to a jury - confession of judgement (two different times (one personal, one LLC) - guarantor waivers
There is no comfort in a standard purchased form when the standard form requires waiving rights. Not expecting problems meeting obligations of the loan, and yet does not seem right to waive rights to get the loan.
---- Seeking NON-BANKER input on the meaning and real-world (actual) use and risk of waiving.