Personal vs. Business Loan

[Eric Sammons]

Hello,

I recently applied for a Line of Credit at a traditional bank to purchase another SFH rental. I currently have a SFH rental that's completely paid-off, and so I was going to use that as collateral on the LOC. However, the application was rejected because I was the personal applicant, but the collateral home was in the name of my business (which is a wholly-owned LLC). The only options the bank could give me were a business line of credit at a much higher interest rate and shorter loan term, or a personal line of credit using my personal home as collateral.

I don't want to use my personal home as collateral, but I'd also like to get the lower personal rates. I thought since my business was an LLC that's on my personal taxes I'd be able to use a house owned by that business for this loan, but apparently not. Is my only option a private loan, or do you think the particular bank I went to was more picky than others might be?

Thanks for any assistance!

Eric

[Tom S.]

@Eric Sammons Keep shopping around. I don't think the LLC on your tax return matters for convincing the bank, if it's a rental property then it should be reported on Sch E and the LLC is disregarded for tax purposes.

The fact that they want to give you a business LOC at a higher rate is totally normal. For sure, if you want the lowest rates you may have to do it as personal. But at least shop around and get some more quotes.