Is Bridgewell Capital a good lender ?

[Brian F.]

Hello all, I'm considering a private loan with Bridge-well Capital, however they are indicating they don't loan to individuals . This company is advising I'm must close as an LLC which I'm currently not . Any opinions on not only this company, also should I ever operate as an LLC ? I haven yet purchased my first buy and hold property. Any options or tips are welcomed Thank you Brian

[George Despotopoulos]

Hi @Brian F. --

An LLC or other entity is not always a requirement. Some lenders do prefer this as it is seen as the transaction is for a business-purpose . Lenders operating in the space of investment properties loans are not held to the same standards/regulations as consumer lenders because it's not the same type of financing. Lending for consumer purposes (like on your primary or secondary home) carry with it a lot of strict guidelines and lenders for investment property want to avoid this as much as they can. And they should, as the nature of the transaction, and the parties, vary greatly (or that is the assumption).

In order to maintain that 'veil of protection' if you would, Lenders need to make sure that their loans are for a business purposes and not consumer in nature. One way to show a loan is for a business purpose is by lending to an LLC or other entity. It's just another check on a box that goes in their favor if they ever come under scrutiny because when you close a loan into a business bank account and/or to an LLC it tends to show that this is not a consumer transaction or consumer loan.

Borrowers usually want to invest as an entity, and commonly an LLC, as it affords a little more in terms of asset protection. This usually makes a little more sense when you're starting to build up your portfolio and have more at risk. If you have 12 different LLCs that own 12 different properties, it's viewed as more difficult for an issue with one property to put in jeopardy the other 11.

From a lender's standpoint, we still want a personal guarantor on the loan if the entity is the borrower. So this added protection of an LLC doesn't shield you so much as a borrower guaranteeing a loan to the entity because if you foreclose the lender may still go after you personally for the debt (which is what a guaranty is essentially).