Obtaining a Loan as an LLC

[Graham Northrup]

Greetings BP Hive Mind! I hope you are enjoying your New Year's Day. One of my goals for this week is to get prequalified in order to make offers.

However, I will be doing so through my LLC, and most of the loan information out there is for homeowners or personal loans, as opposed to getting a mortgage loan through a business entity. I have gone through the process several times as a homeowner, but never as a business.

Can anyone share any resources with info on: 

• banks that do mortgage loans to LLCs
• the process of getting pre-qualified through an LLC
• rates and terms that I should be looking for as a business borrower

Anyone had any success going this route? Do you try to do local banks, or have you had success with the national banks in this regard?

Thanks in advance and have a great start to your NEW YEAR!

-Graham

[Kenneth Garrett]

@Graham Northrup

Commercial loans on residential properties is not uncommon. You will need to seek out local banks and contact there commercial loan department. It is true, the interest rate is higher and the amortization is somewhere between 20 and 25 years. The advantage using an LLC is asset protection whereby you do not expose your personal assets in the event of a lawsuit. I have completed a number of commercial loans on residential properties. I find the process so much easier than on the residential side.

Remember on commercial loans the property must cash flow. Your debt service coverage ratio must be 1.25 or better. Calculate your NOI - Rent minus expenses except for principle and interest. Then divide NOI/P&I. The higher the number the better.