How does incorporation affect financing?

[MPetty]

Hello everyone,

I am a new investor with not-so-great credit.  I am getting ready to incorporate to protect my personal assets and take advantage of tax benefits.  I was wondering how incorporating will affect my ability to receive financing.  I will only be dealing with multi-unit residential properties.  I have several contacts that are possible money partners, but I would prefer to avoid that route if possible.

Will lenders (commercial and private) be more or less likely to loan money to a fledgling corporate entity with no fiscal history?

Will the same lenders perform credit checks on the manager/owner of this new entity (me)?

If I assemble a down payment using money for private investors, how much easier will it be to secure a commercial loan?

And finally, I have a very basic question about equity.  If I have a multi-unit property with positive cash flow that was purchased using a mortgage that private investors paid the down payment for, then I refinance the property in two years for a $100,000 dollar increase, do I repay the investors their loan + interest with the equity and make the new mortgage payments with my cash flow?  I know that's a long question, but I am confused about where the money comes from to repay the investors.  Obviously, if the rate of return is less than the downpayment percent of the mortgage, the money will not be available from the income to pay back the investors within a year.

[WilsonTaylor]

I believe that your chances of getting a loan for a new corporation are pretty slim unless the corporation has more assets than it is borrowing.  Most banks want personal guarantees from the board of directors before they will loan money to a corp, so if your credit is not good, then your chances of getting a loan are smaller and you will probably have a higher interest rate if you do get one.  This will make it harder for you to make ends meet until you can re-finance to pay your partners off.  My corp borrowed $100k several years ago to buy another business.  At the time it had a net worth of about $180k.  The bank required personal assurances from the BoD as well as monthly finance statements even though the corp was worth well more than the loan.  

HTH

Wilson

[Manofprinciple]

If your credit needs repair, there is a non-profit corp who can assist you with repair.  They are for real and the results are real.  I have referred a several people to them and all have been pleased.  One guy even had some tax liens and a Bankruptcy removed.  You can email them with your questions/interest at freedom_living@hotmail.com .

[Charles E. Brown]

First, if you are buying investment real estate in Texas, you should use a Texas LLC or Texas Limited Partnership rather than a corporation.  Most banks will loan to your LLC or LP and require you to personally guaranty the note.