What is a Commercial Line of Credit?

Mike: Hey, it’s Mike Hambright from FlipNerd.com with a quick expert tip to share with you from Stephanie Casper, who is going to explain to us what a commercial line of credit is.

This expert tip is sponsored by B2R Finance, VirtualStaffNow.com and AceBusinessFunding.com

Stephanie: So, in the business where I am, at Colony American Finance, we have bridge loans that we also refer to as lines of credit. And, oftentimes, borrowers tend to think, and can be a little bit confused by that concept, thinking it is similar to a HELOC where you have a checkbook from your lender, where you can just write a check no matter what you need. And that’s not analogous to what these commercial lines of credit are.

These commercial lines of credit are more of a commitment to fund, a credit commitment, a committed loan amount by your lender that enables you to come back to them with opportunities to take draws and advances from that line, to help finance or fund your investment projects. In the single-family space, that would be your acquisitions of properties and, in some cases, rehab associated with those properties, or the combination of both. So I wanted to kind of clarify for those out there who may not be fully versed in what that truly means by just kind of giving that broader definition.

Mike: So you don’t have that checkbook access where, if you have a half million dollar line of credit, just go spend a half million dollars. But you should, if you’ve been approved for that amount, know that if the deal fits your lender’s criteria, that you should have access to that capital there.

Stephanie: That’s exactly right. That’s exactly right.

Mike: Perfect, perfect. Thank you, Stephanie.

Please note that views and opinions expressed by the individuals in this program do not necessarily reflect those of FlipNerd.com or any of its partners, advertisers, or affiliates. Please consult professionals before making any investment or tax decisions, as real estate investing can be risky.