Leveraged Line Of Credit

[Charles Whitaker]

I have been looking into a business Line of Credit and have a few questions:

- I notice that some people can obtain a huge Line of Credit based on a very small piece of collateral (let's say a $500k LOC on a $100k collateral). Is this feasible because they are using a business Line of credit? I know HELOC's are only based on the equity position.

- I assume you can use the funds to do as you wish, i.g., purchase a flip and rehab all with the same LOC.

- what are the typical requirements to obtain a business LOC? I notice some lenders require 6 mo's of business activity and at least 50K of annual revenue. How much does your personal credit factor into this loan type? Any other requirements that I need to know?

Any other info would be highly appreciated. 

Thank you

[Ned Carey]

@Charles Whitaker generally lenders want the line of credit to be fully secured. That is certainly true with real estate related lines of credit.

There may be other factors that are considered and every lender is going to be different. Things like total net worth, history with the lender, etc can be a factor. 

I doubt Bill gates would need to pledge full collateral for a small credit line. I bet I would have to pledge at lest 100% collateral or even more to get a credit line.