Purchasing an LLC with great credit history to use for future funding applications?

[Belinda Lopez]

I recently saw an ad for a funding program whereby you buy established LLC with good credit histories and then are qualified for funding within a few months. This sounds like a great idea - anyone done this or have insight into just how well this works?

I am working with an owner of 8 rental homes who is selling off the portfolio and the LLC. Could I purchase this LLC myself and use it to apply for business funding in the future?

[Bill Gulley]

Wow, what a scam it's not new it's an old one. Looks like they are back again.

Before a business entity can stand on it's own "credit" it will usually be a listed Dunn & Bradstreet listed entity or, (as well as "and") it's net worth will be considered to cover the line of credit. If your net worth can cover the debt and be secured, credit will be less of an issue.

Any smallish company will always be required by any institutional lender or an private lender that has any awareness, to provide a personal guarantee and that individual's personal credit will be not only taken into consideration but the primary credit determination, not past entity credit lines under previous owners.

A new owner does not inherit the credit worthiness of past owners as these credit company scams claim. The only way to continue that credit standing will be by having those previous owners, officers or directors in that organization.

The ploy is to start a company, open lines of credit with known or even related creditors, build up the credit and spin it off saying you obtain the same credit lines with those creditors or that it gives you an open door credit wise to other creditors. Not true at all unless there are relationships besides credit between that entity and the lender/creditor.

I have also heard of such companies being set up with HML types. The company is sold for $$$$ then the new owner applies with the HML type and they receive financing.....what they don't realize is that they could have gotten the financing anyway, it could be the price of the company purchased is simply a loan cost, paying for access that is not really shown as points on that loan. You're paying dearly for financing from a lender that has some relationship with the sale of that company.

Then, there is the debt created and guaranteed by the entity, payments are shown as made. You buy it, then the loan goes bad, you get hammered for full payment. Your attorney looks at the operating agreement and finds in the fine print that new admitted members personally liable for debts of the entity, you're had! I know a surveyor who fell for this one, an engineer who dealt in RE.

Remember the old "if it sounds to good to be true" if there is anything that you get into that costs you money to solve some issue that is customary, you're most likely had. :)