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    19 Replies Latest reply on Aug 24, 2008 3:01 PM by FASTCARS

    Bank Line of Credit for a new business.

    realestres Newbie
      I am curious if anyone out there can give me some solid advice about obtaining an bank line of credit for my business? I formed my company a year ago, real estate investements. I have been using my personal cash and credit to financing my first venture, but now I am looking to use a bank line of credit to get a couple of deals started, such as downpayments, attorney fees, rehab costs. I would then refi and pay the line back. I guess I am asking what is the best way to get an unsecured line of credit for my business, especially when it is new, very little capital and assets? Thank you in advance for your responses.
        • Re: Bank Line of Credit for a new business.
          LUCKIEST Guide
          That is a tough question. With real estate falling, the housing slide and sagging prices, along with
          so many houses unsold, how has the year been for you??
          So many people use there own personal cash and credit lines to start a business with the hope that
          income will come in to pay back the credit lines. Cash flow becomes very important.
          Do you own the real estate investments?? It is going to be very hard to get an unsecured line of credit.
          Hopefully other members might have more positive answers.
          Good luck, LUCKIEST
          • Re: Bank Line of Credit for a new business.
            Rey63nolds Newbie
            I would check with my local bank and speak with a loan officer. I use Bank of America and they have a line of credit called Business Credit Express that is offered to all small business owners to use in any way needed for the business. It's hard at times, but it would be better to keep your business income and expenses separate from your personal. See what your local banker can do for you in this area. The line is unsecured and you would pay it back the way you would your credit card. You might consider applying for a business credit card also. That is another way to keep your expenses separated. If you have any further questions, don;t hesistate to ask.
            • Re: Bank Line of Credit for a new business.
              LFCOORS Newbie
              It's all about your paydex score and Dun and Brad Street rating along with your personal credit. Make sure you establish a business credit profile aside from your personal profile like phone number in the business name, department store credit accounts like staples, compusa and pay them ahead of the due date etc. Those will help get you a D&B rating and paydex score. You will also want to go back and file any business tax returns for the business to show a decent gross revenue and net income after all expenses and write offs. All banks will lend off the gross revenue of the business from 10% to 20% but dont go and write off everything to show no or very little net revenue because that will hunder your loan from being approved. ie. if you declare 150000 in gross revenue the linders will lend from 15K to 30K based on where you go. Make sure you visit the Dun and Brad Street website and find out how to develop a strong rating. Ask the personal bankers tons of questions and if they dont know the answers ask them who you can speak with to find out, dont just apply blind without knowing what you are getting into because you only get one chance to apply correctly with the underwriters, make it a successful one. If you havent already done so consult with your CPA as to if it makes sense to switch to an S or C corp from a sole proprietor in order to save more on your tax liability. Good Luck.
                • Re: Bank Line of Credit for a new business.
                  rosereis Newbie
                  I am faced with some what the same situation, but with a few differences, i.e. I used personal cash, credit cards, family and friend cash. My business is an saaisted living. The value of the property has increased because of great deal of impruvements/renovation to the buildings, new equipments and furnatures etc. I am about a line of credit on the property, any advise.

                   


                  Thanks
                • Re: Bank Line of Credit for a new business.
                  cmorse1 Newbie
                  The only advice I could give you is don't get the line of credit where you bank. My experience was at the least a nightmare. Banks have a tool called "Right to Offset". I was in your shoes, I started a business back in 1999 we did pretty good and I decided to develope my own product. Like you I looked for a line of credit expecting to repay it with a Re-Fi. Things kind of bogged down and bumps in the road here and there caused me to miss a month on my line of credit. I finally got the Re-Fi, payed the bank about half what I owed on the balance and then BAM, they lowered my credit. Now in my case I planned on using that 5K I paid on my line of credit on finishing my product while continuing with my payments. By basically losing that 5K I was unable to finish my product on time which caused a major cash crunch and I had to pay out of pocket, when I had the money, to finish my product. Well to make a long story short exactly when my product is finished and I had just started to repay the bank they used this procedure on me called "Right to Offset. It's an ugly nasty procedure where the bank goes into your business account and pretty much cleans you out. I had several checks out that I couldn't cover, suppliers were threatening to cut me off. I was left with $100. I am currently staring down the barrel of bankruptcy and I had a 100K year business. Most people would say, "you got to pay your bill", I was one of them. My credit has always been good but this whole thing has taught me a very valuable lesson, don't put all your eggs in one basket and make sure you will have the re-fi funds to complete your plan, my problem was the real estate market changed along with the lending procedure for stated income.
                  • Re: Bank Line of Credit for a new business.
                    baboo2007 Newbie
                    Good Luck, I wish you all the best, with all the interest in the Real Estate Business, I also started a business in the same field using the personal cash to get started. And to be honest the business is not doing well. I am now seeking a financial way out by expanding my efforts into another field that I am experience in. I you have a way out or someone that will help you seek the money that you need please do so. Banks are very hard on new businesses.
                    • Re: Bank Line of Credit for a new business.
                      Qualified Newbie

                      Depending on the opportunity and expected return on the initial investment, what about seeking a partner that has the cash to invest and give them an agreed upon percentage of the earnings? For example, with the realestate market down, perhaps you could seek a specialist in Property Rehabilitation that already has a line of credit. I know a local investor that is seeking a project to work on and together you might be able to determine if it makes sense to partner in this venture. If you are interested send me your contact info to mailto:dee@qualifiedconsultantsllc.com and I will put you in touch with Mikal to expore options.
                      • Re: Bank Line of Credit for a new business.
                        Ed O'Gee Adventurer
                        Banks are going to be a little leary of the real estate business, right now with the capital markets in disarray they don't want real estate backed assets, they want to get their money too. You best bet may be to look for an investor or partner. An angel investor who thinks your business could be profitable may be a good fit, also how about raising funds from friends and family?
                        • Re: Bank Line of Credit for a new business.
                          xan021 Newbie
                          I went down that road before. The 2 easiest banks to get a
                          line of credit are BofA and Wamu, no doubt on that one. The only problem you
                          might have is they require your business to be open for at least 2 years. If
                          you are open for at least 2 years and have a good credit score both banks will
                          give you a line of credit based only in your credit score. NO collateral and NO
                          income verification. I have a line of credit in both banks, both have disadvantages
                          and advantages.
                          BofA you have to wait I think 2 or 3 days if you want to withdraw money from
                          the credit line. Wamu you can go to the branch and get the cash immediately.
                          BofA has no yearly fees. Wamu I pay $150, in the beginning I got a deal with
                          the branch manager and she waived it for me but now she is no longer there, I
                          have to pay them. Be friends with your branch manager, they can give you an
                          extra push if they know you.
                          BofA sends out promotional Low APR letters at least 6 months out of the year.
                          Wamu does not.
                          Between both I would take BofA, due to the no annual fees and the promotional
                          APR letters. I just don't like to have to wait 3 days to get the money.
                            • Re: Bank Line of Credit for a new business.
                              Ed O'Gee Adventurer
                              BofA doesn't require your business to be open for two years - I got a line from them ( a small one) last year and my current company is only 12 months old. They will check both business and personal credit history for the line. It was easy for me because I was a customer, kept pretty good balances in my accounts plus I have a fairly go credit history.

                              I do hear Wamu has a similar product which does virtually the same thing
                            • Re: Bank Line of Credit for a new business.
                              LT Lawn Care Wayfarer
                              Your request is going to be tough given banks don't want any more houses, they want money. Your goal of refinancing right away depending on the area you are in is going to be tough.
                              • Re: Bank Line of Credit for a new business.
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                                • Re: Bank Line of Credit for a new business.
                                  LUCKIEST Guide
                                  Banks want to see a Business Plan, Maybe this will help, LUCKIEST

                                  h3. 6 Steps to Small Business Success

                                  1. Start Smart
                                  2. Plan Ahead
                                  3. Set up Systems
                                  4. Seek out Sales
                                  5. Aim for Growth
                                  6. Leverage Opportunities

                                   

                                   


                                  1. Start Smart.
                                  Identify a niche. Don't compete to be the lowest cost provider. Look
                                  for what makes your product or service unique and adds a special value
                                  for the client and charge for that value. Every business has many
                                  facets. Start with what you know and like; start a business that has
                                  meaning to you. Keep in mind that we don't know what the future holds,
                                  many of the jobs and businesses of tomorrow don't exist today. You can
                                  create your own success.

                                   


                                  Now is the time to dream. To start smart, you should like the idea of
                                  the business. The way to earn a good income and build wealth is by
                                  serving clients well, making their life better in some way-it's more
                                  than filling a need in the marketplace. To succeed you want to test the
                                  idea to make sure your potential clients like the idea too. Test your
                                  ideas.

                                  2. Plan Ahead.
                                  People often ask me why bother with a business plan? Look at the
                                  lottery as an example. You may get lucky and get the winning ticket,
                                  but the odds are against you when you rely on random chance. I'm a risk
                                  taker...but not that much, minimize the risk of going into business and
                                  maximize your potential for success. Take the time to write a plan of
                                  how you get from point A to point B. A plan gives you a clear future
                                  focus and increases your chances of success.

                                   


                                  The first rule of a start-up is put some of your own money in the
                                  business. As the owner you must be willing to capitalize the business.
                                  The second rule is put as little of your own money as possible in the
                                  business. Prepare your plan and look for funding for your business from
                                  multiple sources, which can include a business loan or business line of
                                  credit.

                                   


                                  Don't go it alone. Plan ahead now to build your team. Your team may
                                  include a CPA and an attorney that you work with as needed. Add a
                                  mentor from your industry and get a SCORE mentor to help you plan for
                                  success. No one has all the answers. You get more ideas and information
                                  by building a success, support team that can help you plan ahead.

                                  3. Set up Systems.
                                  The most basic system every business should have is a good financial
                                  system. Ask yourself how am I going to generate enough income to
                                  support myself and my family. Begin here. Put together a personal
                                  budget, so you know what it costs you to live. Now, you can move on to
                                  the business budget and sales planning, so you can see how many sales
                                  you need to break even and make a profit. The start-up expense plan,
                                  operating budget and your accounting software are vital to your
                                  success.

                                   

                                   

                                  4. Seek out Sales.
                                  The daunting question is how do you go about seeking out your first
                                  sale. Recognize that since you don't have a big ad budget to be seen by
                                  everyone, you need to target a niche and get connected in your market
                                  community, be it local, regional or national. You need other people
                                  selling for you-not employees-goodwill referrals. Get out and talk to
                                  as many people as you can. Join organizations that would have clients
                                  for your product or service. Become a visible part of your market, and
                                  then ask for the sale. You begin the sales process with people that you
                                  know. Yes, it's okay to start with friends and family as your first
                                  customers, and then broaden from there.

                                   

                                   

                                  5. Aim for Growth.
                                  The basic tenant of creating a company is that you own the company. You
                                  are not just creating a job for yourself. It's less risk and less
                                  investment to get a job. Building a business is creating a company that
                                  is more than the job itself. Think about the future. How large do you
                                  want the company to be in terms of sales, net profit and employees?
                                  Your answer to each of these questions will influence how you grow.
                                  There are varying costs and profits associated with growth. It's
                                  important to make a deliberate choice early about how you want to grow
                                  your company.

                                   


                                  6. Leverage Opportunities.
                                  Good luck. Good fortune. Good timing. All play a part in business. As a
                                  business owner, be very clear about your core focus for the business
                                  and how it serves clients. Your core business is what pays the bills.
                                  Then, as an entrepreneur you are about opportunity. When you see a
                                  potential opportunity or stroke of luck measure it against your core
                                  business focus. Good fortune is great, when it matches your vision for
                                  the business. Always consider if a good opportunity is the right fit
                                  for your business. If something looks great, but it's not in sync with
                                  your long-term plan and budget, think carefully before committing your
                                  company's resources.
                                  • Re: Bank Line of Credit for a new business.
                                    loan guy Wayfarer
                                    I have many friends in real estate business. They have been able to obtain credit lines of 100k. They had strong focus and work their plan. I can assist you with your venture. What is your business name? Email me cory@walkerlender.com
                                    • Re: Bank Line of Credit for a new business.
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