Wells Fargo Businessline Line of Credit

[Leigh Ann Smith]

We have a business unrelated to real estate that is a sole proprietorship (no LLC). An offer came in the mail from Wells Fargo saying that our business is pre-qualified for a BusinessLine line of credit of up to $100,000 at 5% - 13% "depending on your personal and business credit evaluation".

We have just set up an LLC for real estate investing. Assuming the terms are favorable, could we take out this loan for our sole proprietorship, then transfer the money to our LLC? Since the loan would not be secured by the rental property, I would presume that the bank would not have any say over what we do with the money as long as we are making the payments.

Also, would this be piercing the corporate veil?  I'm going to post a separate message about the corporate veil, because there are some generalities that I do not understand.

[Craig Brouillette]

To answer your main question, the bank will ask you what the funds will be used for and a typical response is "working capital to operate your business". Once you get the line of credit they won't really have any say how you use the funds so you can fund real estate investments if that's what you want to do. I'm not sure about the corporate veil so hopefully someone else can help there.

With that said, offers in the mail from banks usually state what terms the perfect borrower can get and for business loans the perfect borrower doesn't always mean someone who makes lots of money and has a 780+ FICO score. I worked for a bank and one of the important approval factors was based on the industry the business was in. For instance, 2 clients who both show profits of $350k/year on the taxes and both have 780 FICO scores but one client is a dentist and the other is a real estate investor. Almost every time that dentist would get the $100k line of credit and the real estate investor would get something significantly lower like $15k. Banks target industries they like to borrow to and usually real estate investors aren't the target market for the bigger banks.