Posted by Ed Garcia on October 31, 2001 at 10:09:00:
Tony,
The mechanics and criteria of your “Working Credit Line” can vary depending on you, the lender, and the circumstances. These lines are not carved in stone and can very from lender to lender. I’ve had a couple of investors in my third workshop, one named Pete Julian, and the other I think was John Longest both from Ohio, and both have several credit lines with different perimeters.
You the investor are the architect of your credit line; the bank is the provider and will try to keep it within their lending policies and guidelines.
If you and your bank have a good working relationship, you’ll find them to be more flexible with their policies and guidelines. That’s why I target small banks rather than large, because it’s easier to establish a relationship with a lender, were you can talk to the principles that are involved with your loan decisions.
Tony, a working relationship doesn’t mean that you go to the bank get your working credit line and go on your merry way. It means that you go to lunch, golfing, what ever, but spend time with your banker, to develop a relationship not just an acquaintance with your banker. In answering your question it could go either or both ways depending on what pre-arrangements you have set with your banker. In most cases, they’ll want an appraisal and title, but I have had it where they do as you say, just write you a check.
Both Julian and John, who are not associated with each other, each have one of their credit lines where the bank gives them up to a certain LTV per deal and will let them pull cash for fix up or to keep. These men have been established investors for years and have learned how to improve their lines over the years. There was no Ed Garcia to teach them when they started; it was just trial and error.
You have to ask yourself, if both of these men had working credit lines when they came to my workshop, then why did they attend? The same reason they stumbled across the working credit line, when many investors are unaware of it, and that is they are always looking for a better ways to finance their deals.
Tony, your working credit line is yours, and has to be tailored to meet your needs. However, you may not get what you want your first time out, and may have to earn the credit line that you so desire.
Ed Garcia