Loans to newly formed LLC - Posted by Steve

Posted by Steve on August 26, 2003 at 04:27:02:

Another idea has got me thinking. Could Investor A loan(private note) the LLC $ ( LLC has cash for 2nd property, keeping in mind the LLC already has 1st paid for, with income) and then sale the paper to Investor B for small profit. To complicate it futher, could Investor A and B be Members of said LLC? Maintaining current respective ownership. Sound like A win, win, win.

Loans to newly formed LLC - Posted by Steve

Posted by Steve on August 25, 2003 at 01:59:55:

In Feb 2003 started an LLC
April Pd cash for 12 unit. 15,000
May sold 12 unit for Profit (Whew!) 32,000
Aug Paid cash for duplex. 17,000 Apr Value 30,000-40,000
Want to finance say 50% of Duplex to have cash for second.
Using cash buy a second property. (cash deal)
Repeat as needed.

Question is: will a bank loan money to a newly formed LLC without subjecting any of the three partners to “sign” on the dotted line. Are we to smart to keep houses on seperate notes? Will this allows us to leverage ourselfs properly?

Re: Loans to newly formed LLC - Posted by Jim Rayner

Posted by Jim Rayner on August 25, 2003 at 18:42:05:


Putting it bluntly you are way to new an LLC to get a bank loan without the partners’ personal guarantees. Matter of fact I, after 7 years, still have to provide personal guarantees to loans made to my LLC. I don’t think the day will come when this will not be a requirement but its not really a big issue. It took us two years to build the credit rating of our LLC to the point where we are just closing a 2.8 Million deal through the LLC.

The issue of separate notes on each property is really one where you need to answer the question of: What is going to be our investing statergy and how does the issue of the financial structure play out in our proposed business plans.

How you will leverage yourself is also an important issue that again depends on your proposed business statergy. There is no one general rule of thumb for these issues.

To have your LLC build credibility within your local lending community you need to develope a business plan. That plan needs to be well organized, well thought out, and properly presented. You need to have that in hand as you begin the process of building those vital relationships with your local lenders.

An archive search on business plans here in financing forum as well as in the commercial forum would be very enlightening for you. Additionally an archive search in the commercial forum on building banking relationships should be equally enlightening.

hope this helps