Anybody structured a private HELOC before?

[Patrick Menefee]

Hey all, looking to hear from people who have structured a private loan as a line of credit. The main question is...how did you structure it so that it made sense for both the borrower and the lender?

The benefit of any line of credit over a simple loan is that you only pay interest on what you've drawn, plus the simplicity of only drafting one loan rather than doing it over and over again.

Where I'm struggling is how to apply this to a private lender utilizing something like their IRA. As a borrower, it doesn't make sense to pay interest on the full amount when it isn't being used. As a lender, it doesn't make sense to have money that can't be invested elsewhere but also is only earning interest when someone else decides.

I'm currently considering a couple of options...

• Interest paid only on drawn funds, but with a larger minimum draw amount and a higher interest rate (~10%)
• Low rate (2-4%) paid on unused funds, moderate rate paid on drawn funds (6-8%)

What am I missing? If you've done this before, how did you structure it? If you were the borrower/lender, what would be acceptable to you?

Thanks in advance!