Best banks for an LLC

[Nathan Siemer]

Hello,

We are in the process of setting up our LLC and are hoping to get some pointers on good local banks for small businesses. Our business will be focused on property development investments and buy and hold rental properties.

Any recommendations on banks that are best for our needs?  We’re most interested in great customer service, ease of transactions and favorable savings and loan rates for businesses.

Thanks!

Nathan

[Glen Wiley]

Most banks will not lend to an LLC that does not have well documented P/L history. The typical approach is to buy the houses individually then move them to an LLC.

Have you talked to asset protection specialists? The reason I ask is that in most cases you will want multiple LLCs, one for management, one or more to old the properties and then one as a holding company for the others that can hold your cash.

[Stuart Udis]

I disagree with Glenn. Most banks will lend to borrowers who own properties where the deed holder is an LLC. This will still be recourse debt meaning you will serve as a personal guarantor. Unless your expectations are for non-recourse (which doesn't generally exist in the context of your borrowing needs), lenders are going to be more concerned with you as the signer. Also, the web of entities that Glenn mentions is truthfully pointless. It adds no additional protection and will not shield you in the event of a lawsuit. Any competent plaintiffs attorney will bring in all entites Glenn described and argue an alter ego exists to latch onto whichever entity has the insurance or assets that are easiest to collect upon. I do beleive in owning real estate as an LLC, but more important to operate the LLC correctly above all else.

As for your intiitial question, while I do not have familiarity with banks in Portland, speaking more generally you will most likely find the smaller banks offer the more competitive construction loan terms and the larger banks will generally offer better take out financing once the properties are stabilized. For this reason it's best to build relationships with both categories of lenders. Also, you should be focused on constuction lenders who offer best leverage (usually those who will capitalize interest reserve &  finance a portion of the soft costs), lower floors on the rate since most banks tie their construction debt pricing to the fed rate, perhaps offer lower or no pre-payment penalty if the property reaches the permanent financing phase of the loan product before you are able to refinance and low or no required depository relationship outside of the actual operating ccount. For the takeout lenders lower pre-payment penalties should be at the top of your list with no or lower seasoning periods. Savings rates should honestly be at the bottom of the list with respect to both the construction and take out lenders.