Traders and loans and other such things

T

traderwald

Hi guys

If as a trader one wants to get a loan, do you trade as a company i.e. trading account in company name and pay yourself a salary as a owner of that org? Or do you trade as an individual i.e individual trading account and be owner of a company that you set up and deposit the trading profits in that comp. bank account and pay yourself from that account ?
 
etrades said:
Hi guys

If as a trader one wants to get a loan, do you trade as a company i.e. trading account in company name and pay yourself a salary as a owner of that org? Or do you trade as an individual i.e individual trading account and be owner of a company that you set up and deposit the trading profits in that comp. bank account and pay yourself from that account ?
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Banks really choke on anything that isn't regular, long term W-2 income. They shouldn't, they're stupid and slow, but they do and that's the reality we live in. If you anticipate needing a loan I'd highly recommend setting up an entity and paying yourself W-2 wages sufficient to provide the loan coverage you need. It's probably tax inefficient and a PIA but it works. You could have $500k in investments and you may find a bank won't give you a $400k, 80% LTV home loan, but if you make $75k per year from Bankersaremorons, Inc. with no savings they treat it the same as if you work for IBM and happily give you the loan. It's a little funny because they require a bunch of verification from your "boss" about how long you've worked there, if you still work there....and lemming like take in your own answers to those questions but god help you if you try to explain why having more in assets then your entire debt exposure is low risk to the bank....
(Based on my experience as an entrepreneur rather than trader but I think the same truths hold)
 
etrades said:
Hi guys

If as a trader one wants to get a loan, do you trade as a company i.e. trading account in company name and pay yourself a salary as a owner of that org? Or do you trade as an individual i.e individual trading account and be owner of a company that you set up and deposit the trading profits in that comp. bank account and pay yourself from that account ?
More...

You can do either depending upon what country, who you're trying to get the loan from and your credit rating. :D

Yet, I would not get a loan to finance the trading capital. In contrast, if you're talking about getting a loan for other issues (e.g. renovate the home office back appreciates the value of your home) is something different.

wrbtrader
 
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Sig said:
Banks really choke on anything that isn't regular, long term W-2 income. They shouldn't, they're stupid and slow
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Yes! I only show about $100K in income a year, but the bank accounts are many multiples of that. They would not give me a personal line of credit for $250K because of the income (and, apparently because I'm divorced.) There are various reasons I wanted a line of credit vs a HELOC.

They did give me a HELOC though, so whatever. I'm guessing it's easier to recover in case the loan goes bad.
 
Hi Guys,

Thank you for the replies. I also wanted to clarify that, I want to ask the above question mainly about a mortgage loan and if they would give it. Although I am also interested in general as well.
 
nooby_mcnoob said:
Yes! I only show about $100K in income a year, but the bank accounts are many multiples of that. They would not give me a personal line of credit for $250K because of the income (and, apparently because I'm divorced.) There are various reasons I wanted a line of credit vs a HELOC.

They did give me a HELOC though, so whatever. I'm guessing it's easier to recover in case the loan goes bad.
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You can apply for multiple lines in a short time(1-2 days) without most of the other banks seeing your applications. 5 LOCs at 50K is the same.
 
tsznecki said:
You can apply for multiple lines in a short time(1-2 days) without most of the other banks seeing your applications. 5 LOCs at 50K is the same.
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My condition for applying was that they wouldn't ding my credit or report the application. They kept their promise. I didn't need the money but it would have helped me fuck over the IRS
 
nooby_mcnoob said:
Yes. See I'm just a pleb who makes good money. They want all of it. So I try to fuck them over every chance I get. For example deliberately causing audits that come up fruitless.
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Haha, I know the feeling. There was one year I didn't file, about 23 years ago, because I know I didn't owe. All me earnings were straight W-2. They picked me as a random audit, and when all was said and done, it turns out they owed me a couple hundred bucks. And they ponied up the dosh. Hehehe, assholers! Neener!
 
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