Limited Liability Corps and Loans

[Gordon Olson]

 I have another friend, actually the person that introduced me to BP who is also a Pro member like me @Delmas Gibson that has questions as well about being able to borrow or get funding when one owns an LLC.

Are there any issues that might make it challenging to borrow funds due to LLC ownership? Delmas, feel free to restate what the issue is as I don't remember exactly how you put it.

Thanks.

[Jennifer Gligoric]

If you are doing traditional financing Freddie / Fanny you will have to use your own name in financing. Freddie/Fanny do not allow for LLC Financing so that's a non-issue for those types of traditional loans.

Other types of loans might allow you to transfer out of your name and into the LLC but it needs to be on all the paperwork and contracts from the very beginning that shows both you and your designated entity. If not, if the bank sells the notes, insurance or they later see who they can raise rates on, your account might get flagged because the borrower is not the owner of the property - according to the paperwork. Banks will routinely audit to see who they might be able to get more money out of & if it's a non-disclosed material change to the original lending agreement and they did not expressly agree to the change in terms, they will want to change the terms to make them beneficial to the bank.

Also, if you do not have credit built up in that entity or equity to leverage, the chances of you getting a sweetheart rate are lower compared to your own good personal credit.