Building Business Credit for Your Real Estate Business
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- Опубликовано: 7 апр 2019
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In this video, I discuss how business credit actually works when you have set up an entity for real estate investing. Some promoters will tell you how you can create a business credit profile for your Corporation or LLC then obtain loans in your business name to purchase real estate without using your personal credit profile; unfortunately, this is not the case but there are some things you can do with your business to boost your personal credit score.
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ABOUT CLINT COONS
Clint Coons, Esq. is one of the founding partners of Anderson Law Group, Clint has grown his legal and tax firm to over 400 employees by assisting real estate investors with creating and implementing solid entity structuring plans. His success in these regards is in large part due to his personal investing experience. A successful attorney, real estate investor, and speaker, Clint has used his innovative and dynamic strategies coupled with knowledge borne from experience to help thousands of people save millions of dollars and build real wealth.
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The idea of building business credit isn’t to buy in your business name. It’s to unlock lines of credit to use to buy property. It’s about accessing capital not buying in the business name. I don’t sell anything in regards to this but I have used business lines to buy property. I own 50 units
Could you elaborate a bit more because wouldn't you want to buy under your business name?
@@goldentanner most lenders wont lend to a business entity. So you purchase in your name and then transfer into the business entity.
Youre one of the few people on youtube in this industry
that is both educational and professional! Amazing content thank youuu!!!
I stumbled upon this channel a few days ago...Clint...you are the master at explaining things so clearly.
I am 100% these people for my next business venture setup...and then ongoing...
Thanks a ton for sharing this info...even if it is a brilliant advert for your company!
So good...
Always good knowledge! Thanks Clint!!!
Great info Clint!! Thank you👍
Yes for tradelines it's great. You can get materials net 30. I would say that your paydex does matter in terms of getting lenders to give you better terms. Like in rural areas usually a lender wants 25% down. If you can demonstrate a good score /history it might get you an 80% LTV or better rate.
Great content,you have to have pg, collateral and cash flow to get real estate financing thru your business , banks are not thrilled lending to a business without exeperience and PG
Not necessarily true.
I luv your shows you know what your saying. Awesome guy
Thanks
You are absolutely correct! Thank you for educating is all...
Thanks for watching!
Clint. The best way for is to transition to a C Corp. Walmart. Dollar General. Autozone…the CEO’s are not personally guarantee the real estate they purchase. My smaller companies as well. Very possible to purchase property is a C Corp and the Corporation is on the hook.
loved every minute of this video thanks,
So glad!
Great information! Thanks for breaking this down.
Glad it was helpful!
Thank you, explained perfectly!
You're welcome!
I'd love to see a video about opening bank accounts for LLC's. Specifically opening a bank account for an LLC in a state that I do not live in. If I have a LLC in PA for a rental I own there but live in MD can I open a bank account in MD? Do I need to register my PA LLC as a foreign entity to do that? Or can I just open a bank account solely in PA since I don't conduct business in my home state of MD?
Each entity needs it's own bank acct if only to transfer funds between each other. Each entity is separate and should be treated as such
Depends on the bank. Some banks are against it and some aren't. It's your due dilligence to do the research. Nobody's gonna feed your mouth for free. Move your ass and talk to banks.
Can you do a video on business credit while having multiple LLCs/ a holding company? Which you should get the business credit for and how to use that credit/ cards from that business for the other businesses? This is something I am struggling to find information on. Please. TIA!
Hey Clint your videos are very informative. I just need some clarity on why I shouldn't have a Delaware LLC if I'm trying to build the credit up for that business. I'm going to do business in the DC metropolitan area so I need to know what to do. Thanks!
If you doing business in the DC metro area then you will need to register your LLC in these areas. I do not see any problem with using a DE LLC to build up your credit under your scenario because your information will be viewable when the entity is registered in DC et. al.
Thank you Clint!
You are welcome. Thanks for subscribing.
Great videos! You partner mentioned that you are a proponent of ROBS transactions during Tax Tuesday. Would you consider doing a video on ROBS and how it relates to real estate investing?
Too funny. I was in the studio yesterday cutting that Video. Should be up in a few weeks.
@@ClintCoons I like your content because you're straightforward you don't beat around the Bush and you got a lot of valuable information
@@ClintCoons Question I have a corporation that's been in business for about 3 years Now I'm beginning to start building business credit I Initially started with some net 30 vendors about 2 years back But that's only tier one level I'm in the process of going to start working On my tier 2, Which is store credit and then finally tear 3 which is Revolving and lines of credit. My question is geared towards tier 3 revolving lines of credit., I've heard that you have to have a bank rate in of 4 or5, as part of the underwriting qualifications, which equates to maintaining a balance of $10,000 monthly for at least 3 months. If so is it possible for me to deposit this amount into my business account, since I'm still in the building process?
Great video, THANKS! Question though - how does a person obtain new mortgages for additional investment properties if personal credit will be used? doesn't debt / income eventually get too high?
Absolutely this can become an issue and it is why you need to find a broker who works with investors. Packaging your properties and obtaining a commercial loan can help. As your portfolio grows you can qualify for different lending options. Non-recourse and experienced based are common however at the beginning these are probably not available to you until you can show a track record.
Finally someone making a video that's telling the truth. This NO PG nonsense have gone crazy. RUclipsrs are having people believe they're going to get business credit cards and business lines of credit with no pg. It's mostly people with bad credit trying to get business credit to replace their bad personal credit.
Clint out here being the dad we never had.
Great information!
Thanks
Hi Clint, love all your content it is always helpful! Can you keep your anonymity when applying for a Duns and Bradstreet number ? I see D&B requiring for the name of principle member for LLC and providing my name would remove any anonymity I have with my Delaware LLC. Thank you in advance.
No you can not. You must disclose if you want a Dunns number.
great video
Great Video! If I have a series LLC should I set it up business credit and apply for credit cards using my Mother LLC or the Series LLC?
Typically you would use the parent LLC.
Thanx
Hi Clint, I really enjoy your explanation of the many aspects you cover.
I do have a question about the opening and starting a business credit line.
So I would open the line of credit in my home state, not the states for opening the business S/C Corp or LLC...so, what business name do I use then in my home state for the business card? ... The same business
S/C -- LLC name I have in the 3 states I would be running my sole name Corp/LLC ? Or do I need to make up another entity name to not hinder me in my Real Estate business names in those 3 states mentioned?
Thanks for your time ... back to my due diligence.
Typically you will open up the card in the name of your management entity I.e., your corporation.
Real Estate Asset Protection Hello Clint. Damn...after a few weeks of getting excited by your lectures on Charging Orders and Anonymity I’m now have pause and confusion on where to establish my LLC for flipping and especially the Holding LLC 😖 Can you please do an extended video on these two scenarios for the ‘Best Entity set-up Strategy when planning on Building Business Credit for a holding company VS flipping company??
I wanted these features but now I can’t decide because you now say the creditor needs to confirm who owns the Entity.
Rental example:
Create an operating company that > partners with Holding Company that is > Beneficiary of Land Trust (where property is held). In this case the Operating Company above would not be set up in an anonymity state, thus can get business credit to fund acquisition to then hold, them assign said property to the holding LLC?
Flipping entity scenario:
Simply, just set up entity in a non-privacy state and build business credit in it?
This would be a great video! Thanks in advance, Clint.
A holding company will not need or be able to build business credit because it is not doing anything other than holding investments. The business credit entity will be your active business I.e., your corporation. I have created videos describing the strategies you outlined above.
@@ClintCoons i just set up a holding company. An LLC for pass through income (wholesaling ) and an LLC for passive income (buy and hold rentals ) . Which if these should i be using to set up business credit ? My holding company is a WY but the subsidiary LLCs are in AZ
@@perlaargyle9343 Most likely the wholesaling LLC as it is the active side of your business.
@@ClintCoons thank you so much Clint 😘
Great Information
Thanks
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Hm
Can you do a video on business credit while having multiple LLCs/ a holding company? Which one you should get the business credit for and how to use that credit/ cards from that business or the other businesses? This is something I am struggling to find information on. Please. TIA!
What’s the best address to use when setting up a new LLC when working from home? I was told if I use my home address this would limit or denied me from getting approved for business credit cards
That is a problem. You do need an address at a business locations. Possibly consider Regus.
Looking at you Ty Crandell
Hi Clint. Im looking to do a rehab using a personal guarantee loan from a hard money lender. One guru I follow says to never use a personal guarantee loan.
1)What is the worst scenario If I were to use that type of loan?
2) If you decide not to use those loans how else you can finacing for say a rehab?
Thanks
This really comes down to what the lender requires. Yes if you can get a non recourse loan for your investments then that is always the preferable way to borrow. Typically these types of loans come from portfolio lenders or commercial loans.
Wow 🤩
in the long run how do I check my business credit profile & who are they reporting to if it’s NOT Eqifax,Experian & Transunion ... where would I sign up or go to monitor and check my Buisness credit?
You need to obtain an DUNS number for your business.
Great video.. when should i quit deed a rental into a LLC? And why wouldnt you want anonymity? I thought thats why we set up LLC for?
Jimmy never use a quit claim deed. (see my other videos on this) . You transfer your property into the LLC for asset protection but if you do not want your tenants to know you own the property, where you live, or an aggressive attorney to know how many properties you own then using a WY LLC will mask your ownership.
@@ClintCoons okay. I will check out the other video about the quit deed. btw all my properties are in Nevada.. and LLC in Nevada I heard is also good from another video of yours?
Real Estate Asset Protection can provide a link to your video on Quite Claim Deeds and WY LLC benefits
Real Estate Asset Protection Hello Clint. Damn...after a few weeks of getting excited by your lectures on Charging Orders and Anonymity I’m now have pause and confusion on where to establish my LLC for flipping and especially the Holding LLC 😖 Can you please do an extended video on these two scenarios for the ‘Best Entity set-up Strategy when planning on Building Business Credit for a holding company VS flipping company??
I wanted these features but now I can’t decide because you now say the creditor needs to confirm who owns the Entity.
Rental example:
Create an operating company that > partners with Holding Company that is > Beneficiary of Land Trust (where property is held). In this case the Operating Company above would not be set up in an anonymity state, thus can get business credit to fund acquisition to then hold, them assign said property to the holding LLC?
Flipping entity scenario:
Simply, just set up entity in a non-privacy state and build business credit in it?
This would be a great video! Thanks in advance, Clint.
So Clint, is it fair to say, that there is a tradeoff between anonymity and building business credit?
If I want to build business credit, I can't have an anonymous entity (such as Delaware LLC), because I need to have my name on the entity?
Yes that is what I am saying
Found a website with an article that stated cap one was reporting the business credit card activity to the personal and business credit bureaus. Discover also does it. BOA however only reported to the biz credit bureaus. I'm not sure if it meant for secured only cards or non secured or both.
BOA only reports to business.
@@ClintCoons yea that's what I read.
Hey Clint, 1) For clarity are you saying that generally having the Holding anonymity LLC will prevent business credit building and funding? Or are you that BOTH the Holding LLC's PLUS the REAL Estate LLC's where the property is located will ALSO experience great difficulty in getting business credit and business funding? 2) When should one make an LLC the trustee of a trust? I thought the person whose trust it is should always be the trustee.
Unfortunately using anonymity is not a benefit when it comes to borrowing. That is not to say our funding department can not get our clients lined up with lender's will to work with this type of structure, it just makes if more challenging. Building business credit can be very difficult if you go the anonymity route so that is something you should probably avoid if you are looking to build business credit.
Hi Clint, do you know of any good cash back business credit cards that report to Dunn's?
I do not.
How do tax’s an right offs work for a LLC if you have a video about it can you link it for me ?
Not sure.
Actually you can buy property in your business without a personal guarantor. If you get really high business credit for 12 months no interest you can use plastiq that will write the seller a check on behalf of your business and you pay them by your business credit card.
This is 2022 and new companies and techniques are at the fastest rate of change in human history
If anonymity is the goal, and I set up a say FL LLC owned by a manager managed WY or DE LLC, I wouldn't appear on the FL SOS site. Given that it sounds like it's not possible to build a credit profile for the LLC.
That is correct. I have a video on not using anonymity to build credit for your business.
Clint, for choosing which LLC to build trade lines... I have a Holding LLC with sub LLCs for active and passive income. Should I build trade lines on the holding LLC or choose one of the sub LLCs???
Sub LLC but you will run into difficulty if you are using a holding LLC as its member.
@@ClintCoons that's exactly how I have it set up for anonymity based on the things I learned from the channel. Do you have any suggestions or work arounds?
@@AberrantArt Try to build the credit and if it does not work then put your name on as the member.
@@ClintCoons thank you Clint
If multiple people are on the LLC, can the business card be established under the individual who has the best credit on behalf of the business?
Yes it can
What do you think about Fund & Grow ?
Not aware of it.
If you start off your LLC in state without anonymity and use your personal name to build business credit for that LLC, doesn't that defeat the purpose of having the overarching Anonymous LLC? Wouldn't someone be able to see your association with that initial LLC associated with your name, or how does that work?
Anonymity and business credit do not work well together. You must chose one or the other.
@@ClintCoons thank you for both of your responses! Very helpful and informative series of videos.
What if you have a house in an LLC that has no mortgage. Can you refinance it thru the LLC?
It will depend on the lender. You will most likely need to work with a community bank.
What do you do if your holding company is in Wyoming or Delaware to build Business credit?
It makes it more difficult and usually you would not use the holding company for building credit.
Real Estate Asset Protection so do you suggest we create a separate entity for the sole purpose of business credit ? And if so is it possible that our Wyoming holding company pass some of its profits down to the entity that is responsible for the credit building so that our credit building entity can show some income ?
How is that possible though? So large corporate owner(s) are personally guaranteeing every property????
Large corporate owners do not guarantee loans. I do not have to guarantee commercial loans - but when I apply for a commercial loan the lender runs my personal credit. The point of the video is to point out that if you think you can build credit for an LLC and you will no longer have your personal credit checked when applying for a non-recourse loan or a loan via your LLC, it will not happen. Some investors buy into the myth that if credit is built for their corporation or LLC lenders will no longer consider their personal credit score when borrowing or ask for a personal guarantee.
How exactly will it work if I want the anonymity protection? you said we will have to do a "regular local LLc" where the bank can verify that we are the owners..
Anonymity makes business credit much harder so I tell people you must choose.
Could you talk more about how credit works when you have a holding company and several subsidiary LLCs?
Can you take out a mortgage in the name of the holding company instead of the subsidiary?
Does the credit score of the holding company affect the loan terms of a subsidiary held mortgage if you're signing for it?
Can a holding company with a great credit score and lots of cash flow sign for a mortgage instead of yourself?
Thank you.
The holding LLC will not build credit. The formation of the holding LLC will prevent it from qualifying in most instances.
@@ClintCoons Hi Clint, thank you for taking the time to field all of these questions. Your videos have been incredibly insightful. I had the same question as Josh. In his scenario, where do you build business credit? Would having a PMC , among other reasons, enable you to centrally build credit to pay for operating expenses across all LLCs?
@@superjohn100000 Typically you will build the credit in the operating arm of your structure. Using anonymity and layering can make building credit more difficult. A holding company as I refer to it in my other videos is not an operating company thus, it is not the ideal entity to build the credit. However, if you are running an active business with many subsidiaries then I can see a situation where it would be the appropriate entity for the BC.
28 dislikes... the exact number of lenders in my area looking to turn my trousers upside-down.
hello! can i use my ice cream/street food entity to build it up and then possibly buy a property?
Yes you would build up the income then set up a different entity for the house hacking.
So, parent - child set ups like a WY and NY LLC couldn't obtain business credit then?
It will make if difficult if you are using the WY info on the NY LLC filing.
Video was great up to 6:30. If you put your SS# and personally guarantee a credit card, even if it is in the business name, it WILL report to your personal credit and NOT to a business bureau. You are correct in that building business credit to purchase non-PG real estate is a unicorn. Doesn't exist unless the deal was set up that way. Now, I would say that in some situations you could absolutely REQUEST a deal be done that way and use the strength of your business credit to persuade everyone to join you. So, it can happen. But deals are not sitting out there waiting on your great business credit to close that way. Going back to the business credit cards, you should NOT expect that you will get approved for any TRUE business credit card (that pulls business credit bureau to approve and reports payment history to business credit report) unless you already have a good number of open tradelines from lower-tier creditors.
They do not report to your personal credit bureaus unless you default on repayment. This is true for amex and visa.
How do you have a name" The Business Credit Desk" but you know nothing about business credit? I have 4 business credit cards that I obtained using a personal guarantee. They DO NOT report usage on my personal credit. Only time they will us if you go in default. Its cards like Capital 1 that's not TRUE business credit cards. DO YOUR RESEARCH first before applying.
I have a credit score of 524. Would that hinder me from getting approved for a business line of credit via my LLC?
Most likely
If a fortune 1000 company buys a property with a mortgage, whose credit gets run from the fortune 1000 company?
It's not so much the company's credit but their balance sheet/P&L/Tax Returns that will determine the loan amount and eligibility. If the company is not publicly traded then the bank will want personal financial statements from the owners in addition to the above. I just closed on a loan this week though the business and this is what the bank required in addition to personal financial statements of the owner.
👍🏽
check
It’s so you can get aCredit line so you can get hard money loans and lenders to gain capital to invest in real estate silly
Can you use business credit to build up your personal credit, or repair your personal credit?
Depends on how you define building up your personal credit. Some are able to improve their score by using their business to pay for things on credit and not have it report back to their personal. This does help improve by lower the utilization.
Daddy!
banks dont lend money, they create their own money
Ok, this is the one area we disagree. Never ever sign personally for anything. There are so many different types of creative financing, you never have to go to a bank. A biz card w those banks is the worst thing you can do. 1.) Never exceed debt to income ratio of 50%. 2.) Any one or company will finance a deal w that debt ratio. 3.) Create your own bank!
You WILL NOT get far in business without a personal guarantee. Hopefully you have tons of your own cash buddy. This no PG mess have gotten out of hand.
D C right lol