Working line of credit- personal or business? - Posted by Anna

Posted by fred arndt on March 05, 2001 at 18:42:05:

Ed, Is there any way that you have a sample business plan that we could review in order to be able to work up our own with. I would be very greatful if you had one as a sample. please contact me by email or phone my number is 630-378-4366 as I would look forward to the hel thank you Fred

Working line of credit- personal or business? - Posted by Anna

Posted by Anna on February 01, 2001 at 15:16:13:

Ed,

Having formed a brand new corporation, is it better to approach local banks for a working line of credit in my personal name, or the name of the corporation?

Thanks in advance for your help.
Anna Davies

Re: Working line of credit- personal or business? - Posted by Ed Garcia

Posted by Ed Garcia on February 01, 2001 at 20:16:05:

Anna,

A working credit line isn’t just something they hand out on street corners. It’s also not something that a bank is going to give to a new unproven entity. TRACK RECORD, REPUTATION, EXPERIENCE, these are some of the things a bank wants to see.

Anna, Another thing that I teach is a banking relationship, which can usually be accomplished with small local banks. There are many ingredients to, establish such a line. Remember, It’s a Business credit line, meaning not to be looked upon just to purchase a piece of property, but to have an on going business operation.

Anna, I have a dinner engagement, so I’m going to have to run. But before I go, I want to share some information on obtaining a working credit line with you. Here is an answer I gave to a gentleman names Phil in regards to obtaining a working credit line.

How to get a Working Credit Line

Phil,

You don’t tell us how much experience you have in investing, which is an important factor to a bank. But the Cadillac of financing for an investor would be a Working Credit Line.

A Working Credit Line is AWSOME.

There are just so many advantages to having a working credit line.

(1) You can make CASH offers, allowing you more profit in your deal.
(2) You can CLOSE faster, making that extra deal, and more profit.
(3) You can SEASON your properties, by leaving them on your line for a while.
(4) You can use it to do FLIPS, where conventional financing is too expensive.
(5) It’s CHEAPER money, meaning you pay 1 or 2 over prime and no points
per transaction.
(6) You can make offers with more confidence, which is projected to the seller,
or Real-estate agent.

And the list goes on. First to obtain a working credit line, you must have a TRACK RECORD…
This would not be a financial tool for a Newbie, the Banks would not want a Newbie,
because of the lack of a track record.
As a rule, a Business Plan is required. I usually recommend soliciting a small local Bank. The reason being, you can easily establish and build a relationship with a small Bank,
rather than just taking a number at a larger National Bank.

Phil, I teach people how to get a working credit line, and I can assure you that once you have one. You won’t know how you did business with out it. There’s not a whole lot of information I can give you in just one post other than to tell you that, if you think that you’re ready for a working Credit line, I suggest you contact your local community bank, who I feel would be the best candidate for you at this time.

Now let me spend a few minutes telling you about a very important tool in getting a “Working Credit Line”, a BUSINESS PLAN

A Business Plan is extremely important for 3 reasons.

(1) For you the Investor, it allows you the investor an opportunity to lay out a game plan from beginning to end. In that game plan you can evaluate yourself and your plan. If you done your job right, you can put all the pieces of how you operate together like a puzzle. Such as choosing your title company, appraiser, contractor, tell how you plan to invest in real-estate, your experience level, how you plan to buy, market place, how you plan to market or sell them, What your plans are if they don’t sell, etc.

(2) For you to obtain other Backers (Investors), now you can show them a solid buyable plan, rather than give them some verbal mambo jumbo with holes in it. The Backer will feel more confident in you and your venture, because you have mapped it out for them.

(3) For a Working Credit Line from a Bank. This line is just like having an Investor. It’s designed to allow you to buy property making cash offers to get a better price, cheaper cost for the money, faster closes, get more deals, can season your deal, etc.

Phil, these are just a few reason for a Business Plan. Yes if your intentions are to just do a deal here or there, you don’t need one. If you plan to be a real-estate investor or entrepreneur, it’s PARAMOUNT, for growth and getting the real money from banks as well as romancing Investors (Backers). A good Business Plan adds CREDIBILITY to you and your real-estate venture.

Phil, here is an example of an out line of a Business plan that I give in my workshop.

BUSINESS PLAN

A BUSINESS PLAN is an important tool for the Real-estate entrepreneur in order to obtain a working credit line from a Bank, as well as working with other investors or financiers.

No doubt the entrepreneur grows weary of hearing at every turn about the need for a business plan.

As a banker once told me, I don’t hear too well, but I read real good. Give me your business plan first, then we may talk. The reason for this attitude are several and sound.

First, they want facts, not hype. Most personal presentations are overloaded with hype. Bankers or Investors do not want to be sold a “bill of goods”.

Second, they want statistical and financial data to message before meeting with the entrepreneur.

Third, they want time to do some independent investigation of both the entrepreneur and the proposed business before meeting the entrepreneur.

Finally, they want some evidence of his analytical and conceptual skills.

Prospective associates should be most interested in your plan. Exactly what do you propose to do? How do you intend to do it? Your plan not only discloses you intentions, but how well you have thought our your venture.
Unfortunately, most entrepreneur give scant thought to many aspects of their proposed Enterprise. It often becomes all too apparent in the business plan that the promoter has not done their homework, therefore is not someone with whom you could trust their information.

Even more importantly, the business plan is essential to you planning. The things you would do in writing a business plan will force you to do many essential tasks that you would likely overlook otherwise. The very act of writing a plan for your proposed business will be most informative to you. Definitely, it instills a much needed discipline to the often overly enthusiastic of the " eager beaver investor".

Another definition for business plan, is a “GAME PLAN,” which in all reality we should have when doing a business venture .For this reason, most college entrepreneurial Programs are built around the writing of a business plan.

Most entrepreneurs or investors, are not familiar as to how to write a business plan.

As a result, they try to find someone to write it for them. There is much business for the person who can write good business plans. Unfortunately, much of the benefit of a business plan is lost if you have somebody else write it for you. Sitting down and pounding out the plan, section by section, forces you to do considerable thinking and evaluation of your plans… Without expectation, entrepreneurs who have written their own business plans, report that they were forced to rethink many aspects of their venture when it became apparent to them that they were some serious flaws in their thinking. The parts did not fit together properly.

Your plan is not a blueprint which you follow step-by-step in creating your empire. Instead, consider it a road map from where you are now, to where you want to go. There will be detours and lots of bad roads, but you will still find you plan helpful even if you are continually changing it as new information and new experiences are encountered.

Not surprisingly, most people first want to know what goes into a business plan. The outline below provides some ideas of what might be included in your plan, depending upon the exact nature of your proposed venture. Although I’m teaching you this plan for the purpose of a banking credit line, I felt it important for you to understand the full value of a business plan. Use common sense! What aspects are there to your new enterprise? You’ll have to plan every aspect of your business, either formally or
informally as you proceed. One way or another you must make a lot of decisions about what you are going to do in all phases of the business.

OUTLINE FOR BUSINESS PLAN

Summary-An Executive Overviewed

The Concept
The Market
Competition
The Organization
Your Credentials
The Product or Service
Production Plans
Pricing
The Marketing Plan
The Financial Plan
The Schedule
Operating System
Control Systems
Growth Plans

Phil, Go to http://venturea.com/business.htm there you will find some information on doing a Business Plan. When you think you have your Business Plan done and want someone to review it, call me at (909) 944-0199 and I will have you fax me a copy and go over it with you. I hope this bit of information gives you enough information to get you started in the direction you need to go.

Good luck,

Anna, I hope this shines a little light on the subject for you. There is only so much information I can share in a post. Remember every investor’s circumstances are different from the next, as well as they are working with different banks and principals, and that’s why I can’t just teach every investor the same exact information.

Ed Garcia

Re: Working line of credit- personal or business? - Posted by Darin in CA

Posted by Darin in CA on February 01, 2001 at 16:18:35:

I’m in the same boat your in. If you have a new corporation your chances of getting a credit line is slim to none. The lines that I have applied for not only want my personal garrantee, they want property with equity to secure it. Ed might be able to answer better than me. Good luck and let me know how it goes.