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USTaxAdvising
USTaxAdvising, Accountant
Category: Finance
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Experience:  Professional with finance related questions.
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I have formed a PLLC and plan to engineering consulting. I

Customer Question

I have formed a PLLC and plan to engineering consulting.
I previously retired from a government job and work about 30 hours per week also doing highway engineering.
I plan to quit my current job in the middle of next month and do consulting. I will not lease office space at the beginning since I plan to work out of other companies' offices.
I am trying to secure financing for the PLLC in case I do not have income for several months to pay myself like $4500 per month take home.
I have contacted an internet lender and he has mentioned that he can find me $ 70000.00 business loan but I have to pay him 9.9% for his service/finding funds after I receive the money. I do not have to accept the loan if I do not like the terms.
I was going to send application but then I contacted the bank where I have the PLLC account. They gave me a credit card with a credit limit of $ 16000.00 six weeks ago. I asked banker if they could give in addition a loan like this internet business can find me for a fee. Bank told me they cannot. I asked banker if I default on the loan this business is trying to find on the internet, that if I am responsible or if it will be the PLLCs loss and I will not be liable. Banker told me that lender will probably will make me the guarantor and therefore I will be responsible to repay loan if PLLC defaults.
I have loan application and mentions loan conditions to be set up by actual lender. Business in the internet is going to provide me contacts from 2 to 5 lenders.

Any thoughts/recommendations?

Thanks
Submitted: 8 months ago.
Category: Finance
Expert:  USTaxAdvising replied 8 months ago.

USTaxAdvising :

I think 9.9% loan finders fee is ridiculous. Not only will you have the fee but you will also be paying interest on the loan.

USTaxAdvising :

You won't be able to get a loan for the business without you personally guaranteeing the loan. The business is not yet established nor does it have any assets so the risk of loss from the bank is high, they have nothing to attach themselves to in the event of default.

USTaxAdvising :

Credit card is good but they carry high interest rates, I would avoid this if at all possible.

USTaxAdvising :

If you can secure a personal line of credit through your existing bank (either personally or through the business) I think this is the best option. Lines of credit generally carry lower interest rates and won't charge you interest on what you don't use.

USTaxAdvising :

When your business needs money to pay you, you would simply withdraw the funds from your personal credit line and contribute the funds to the business. The business would then pay you a salary or pay it's expenses. Note that if the business is not taxed as a corporation then there really is no point for you to contribute the cash into the business account. LLCs are taxed as disregarded entities (meaning that the LLC is disregarded and you report the income/expenses of the LLC on your personal tax return via schedule C)

USTaxAdvising :

I also don't anticipate your business would be taxed as a C-corporation. This is not a desirable entity for consulting service businesses like yourself. I would anticipate your LLC will be taxed as a disregarded entity. Note that LLCs are taxed as disregarded entities unless they elect, via Form 8832, to be taxed as corporations.

USTaxAdvising :

Sorry to deviate from your question and onto entity classification....anyhow I think the best source of funds would be for you to get a personal line of credit. It would be cheaper than a credit card from an interest rate perspective.

USTaxAdvising :

having said that though, if you can get a credit card that carries a 0% interest rate for the first few months or year then this would be best.

USTaxAdvising :

I hope this helps. Please let me know if you have any further questions.

USTaxAdvising :

Best regards,

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