LLC Question

[Tessellations]

Hi All,

My family just started an LLC about a year ago. There are three members, myself, my brother and my father. I have several questions that I cannot find answers to anywhere.

Without my father and I knowing, my brother recently filed an economic hardship with the government in order to get a government back refi loan. This destroyed his credit. During this same time, the business was in the process of applying for a small business loan. It was turned down due to several factors. One being that we have not been in business long enough and two being that we have too much debt already. I was also trying to get a refi loan for my home. I was just turned down for the loan. The bank said that one of the reasons is that my brothers credit has affected the business's credit, which then affected my loan. We are odds now because he said that what he does cannot affect me, my credit or the business credit. I disagree but cannot get the facts from anyone.

Any help would be more than greatly apreciated.

Thanks,
Jason

 

[high risk]

A new LLC's credit will almost strictly be based on the credit of the members. If they have poor credit, the LLC's effective creditworthyness will be poor too.

As far as your personal refi, I don't know why your bank was trying to evaluate the LLC's credit. Who owns the home, you or the LLC?

 

[spock49]

You created what sounds like a multi partner LLC.

That generally means all partners equally share in on the LLC's liabilities and profits.

Having said that, if your brother declared hardship under his own SS, I can't see why that would directly effect you (unless he somehow made the LLC liable for his hardship). It would, however, create more hurdles for your LLC as the bank will most likely look at the total credit portfolio (i.e. credit reports for all partners).

Being turned down for a line of credit is rather common these days. Especially since you said you have high debt and your LLC is fairly new.

 

[Sharksfan]

IF you need a line of credit try to get one based on receivables - I did that for a while.

They way it works is simple. Let's say you sell $1000 of widgets/services. It might cost you $600 to produce the widget/service so your net profit is $400.

The bank will set up a line of credit to lend you $600 based on a signed purchase order. The contract "Payable to" will be the bank (and you just explain to your customer that the bank provides that as a business service to you - it's usally payable to something like "XYZ Corp, ABC Bank".

The bank gets the check, pays off the invoice, and deposits the $400 (minus some interest) in your account.