Selling companies with credit lines

My last couple threads go me to thinking. If I can secure a business loan on a new LLC by putting 200k into the LLC’s checking / savings account…could I then withdraw the money from the account and either still use the line of credit…or even sell the LLC with it’s new line of credit for a profit? If this is possible, I could form LLC’s, deposit say, 200k into each account, secure a line of credit from the 200k, withdraw the money and sell the LLC. I could probably sell a company or two a month doing this. Possible? Legal?

Possible and legal, I suppose. However, if the LOC is secured by the assets in the LLC, then what is the LOC worth to anyone buying the LLC if the LLC has no assets?

Before the bank will let you draw from the LOC, they will put a hold on the funds you have deposited as collateral for the loan. If there is nothing on deposit to secure the loan, they won’t loan you anything.

How long do they freeze the funds?

I suspect it will be life of the loan. Once the loan is repaid, the funds will be released and the credit line will be closed.

All things possible,
The bank will require a personal garuantee from you. When you sell the LLC and the new owners defaualt they will look for you. If they don’t want a personal garuantee then as DaveT says frozen funds till they know your biz will float. Could be years.