Personal Gtee for LLC

[Lawrence H.]

Hi BP!

Is it common for refinancing banks to require a personal gtee even if they're lending to an LLC? Isn't the point of the LLC to limit risk to the investor? Additionally, if there is a personal gtee, won't the loan show up in a personal credit report and affect DTI? Understand the lender would want extra protection but they technically already get the property as collateral since they have 1st lien position in the home.

[Todd Rasmussen]

@Lawrence H.

Yes it's very common for a personal guarantee. The point of the LLC is to limit the risk of the investor, which is why the bank is requiring a personal guarantee. How could they lend money to a LLC (presuming newly established and not much credible history) if you could just fold it up and put the cash in your pocket?

Commercial loans won't affect your DTI or credit report, at least mine don't.

Foreclosing and auctioning houses isn't profitable for the bank. Personal guarantee is an easier route to their repayments which is ultimately what they want.