Line of Credit based on Cash/Assets

11 Replies

I keep hearing about a LOC that gives you 5x your liquid cash and/or assets.

For example if someone had $100k in their savings account they would have $500k of purchase power.

Does anyone know anything about this program or have more details on it?

I'm curious what the typical rate, term and amortization is like on these types of loans.

Also would like to know what other requirements there are outside of having cash available.

If anyone has information or insight they can share it would be appreciated.  Thanks!

Finance of America has a program like this. It’s called the fix & flip line of credit. But there are catches...

-$500 to activate line (credited back if deal closes in 90 days)
- 3.5 % origination fees
- Close to 10% rate
- Each project is reviewed/underwritten by FoA, which could take up to 30 days
- Up to 90% acquisition & rehab, I believe
- Standard draw rules on rehab side

@Dennis W. Thanks for the reply but the LOC that I'm talking about isn't a "fix and flip" program specifically. Also I heard rates were somewhere in the 6's and the origination costs were low and more comparable to say a HELOC. We may be talking about different loan types.

@Brian Garrett Ah ok. I've not seen anything like that but would be interested as well. I know local banks will do LOCs on portfolios of investment properties, or other collateral, but normally at like 60-70% equity. I've only heard of the LOC multiplied by assets for the flip lines from FoA, Corvest, etc.

@Brian Garrett

I'm not a lender but I work in lending, underwriting loans......

first let me state that NOT ALL BANKS ARE EQUAL, not by a long shot.

The problem I see with this loan is there is zero collateral. Not necessarily a deal killer on a business acquisition loan where we have a reasonable expectation of repayment based on historical financials, a solid set of attainable projections, or maybe some kind of a secure guarantee (like an SBA loan).

but with no collateral, and it's a line of credit so a bank has no idea what you'll spend it on. I don't see how this can be done......rather, I don't see how any sane bank would go anywhere near that type of product. I'm certainly not saying it doesn't exist.

MAYBE you can put up 100K as collateral in a CD, but still it's 400% without collateral.

for reference, most unsecured lines of credit that I know of require the borrower to have EQUAL the amount in liquid assets. so if you want to borrow 500K cash .....you need 500K in similar liquid assets.

again, I do not speak for all banks. Just 2 or 3 mid-sized ones ;)

@Jeff Hurst Hey Jeff no unfortunately not yet. I can't find the posts where I saw it mentioned.

@Alexander Felice I agree it sounds like it would be a risky loan but I'm assuming it's collateralized somehow. I know it exists because I've seen it discussed. I just haven't found anyone with experience or knowledge about it so I'm guessing at this point that it's a very limited product and may have many caveats attached. 

Originally posted by @Brian Garrett :

@Jeff Hurst Hey Jeff no unfortunately not yet. I can't find the posts where I saw it mentioned.

@Alexander Felice I agree it sounds like it would be a risky loan but I'm assuming it's collateralized somehow. I know it exists because I've seen it discussed. I just haven't found anyone with experience or knowledge about it so I'm guessing at this point that it's a very limited product and may have many caveats attached. 

 yep I've seen banks do all sorts of stuff I thought was absolute madness, but they do it!

didn't' want to say it wasn't possible, just that the risk is high. When that's the case it simply means the bank needs you to buy the risk down upfront. Expect high rates, high points, and underwriting to be similarly wacky.

if it's collateralized then the risk goes way down. having 100K liquid is easy to get a 500K cash loan if you have 500K of collateral, same as a mortgage. under collateralization is the kiss of death for lending:  in my opinion

Keep hunting!

Originally posted by @Brian Garrett :

I keep hearing about a LOC that gives you 5x your liquid cash and/or assets.

For example if someone had $100k in their savings account they would have $500k of purchase power.

Does anyone know anything about this program or have more details on it?

I'm curious what the typical rate, term and amortization is like on these types of loans.

Also would like to know what other requirements there are outside of having cash available.

If anyone has information or insight they can share it would be appreciated.  Thanks!

I think the loan or line you may be referring to Brian is a business line of credit based on 20-25% of gross revenue of a business as determined by last 2-3 year of tax returns. Banks like Opus will do loans like this and many other banks as well. I believe you're referring to this type of line of credit because you did mention 6% rates.

If a bank is going to lend 5X your assets thats extreme risk and you'd probably have to first of all "have," some assets in your company and second of all have the liquidity or means for repayment of that 5x loan otherwise your rate or points will be way higher.

This is why another responder mentioned Finance of America's fix/flip LOC at 10% rate with 3.5 pts. This one has a specific use for fix/flips.

I've also seen 70-80% of real estate value lines of credit that are secured with 1st position lien and these can have lower rates in the 5's (commercial lines not residential HELOCs).

Id be interested to see  the terms/rates for a lender who will lend 5X the value of the asset.