Business Lines of Credit Fees

[Raymond Hunce]

Hello BP Community,

My partner and I just set up our LLC and business bank account to invest in real estate in Maryland (Baltimore and Harford counties). We have no investments yet nor have we conducted any other operations. Now, we are currently establishing business lines of credit, unsecured, which are based on our personal credit (we're each doing this through separate LLCs). The financial adviser that is establishing our lines of credit is charging 8% of the line of credit up front, with no additional payout to him thereafter. For example, my partner should be getting a $50,000 line of credit, so that'll cost him/us $4,000. Is this typical or is this quite high?

Thank you,

Ray

[Mark Scarola]

This sounds all too familiar. I don't know the particular company you referenced, but all of the criteria sounds nearly identical to what a number of other companies are doing wherein they have you fill out an application and then use your information to apply to various credit card companies on your behalf. The "unsecured business line of credit" is simply a business credit card or series of cards. They'll charge more or less 8% of the credit limit they obtain for their role and often tell you that the credit will then be available at 0% interest for a period of time (i.e. an introductory offer). Of course after that first 6-12 months there will be an interest charge on any balance you hold and cash advance fees if that's how you access the money.

I'm not saying that it's a bad thing. I believe everyone can make up their own minds, but I also feel that it's only right that people be informed about what they're getting involved in. Using credit can help to build credit and establish history, but you were asking about rates and it would be unfair to not consider the cost of that money after the intro rates expire. Good luck @Raymond Hunce.