Small Business Loan Financing with Home Equity
A Home Business Article Contributed by Elizabeth Fox-Wise
Look for a Small Business Loan in Your Home!
Small Business Loans are becoming more sought after and more common in America as people continue looking for ways to supplement their income or work for themselves by staring a small business.
Financing a small business loans has never been easy. However, with the creation of home equity loans, many perspective entrepreneurs have been able to get the cash they need to launch and expand their small business.
Advantages of Home Equity Loan for Small Business
There are many advantages to taking a home equity loan to finance a small business. First of all, home equity loans are easier to obtain than venture capital money and traditional small business loans. If you are a home owner, as most small business owners are, and you have equity in your home and a good credit rating, getting a home equity loan is very easy. A Home equity loan is a way of borrowing against the equity you have built in your home.
A second big plus to a Home Equity Loan as a means of obtaining a small business loan is that because these loans are secured by your home, low interest rates are typically available. With a home equity loan you can lock in with a fixed interest rate much lower than most personal loans, commercial loans or credit cards.
Another great benefit of home equity loans is that your interest payments are tax deductible. A home equity loan can be paid back over time with a fixed interest rate. The amount of the loan can be as large as a 125% of the equity you have in your home.
Disadvantages of Home Equity Loan for Small Business
The biggest thing to think about when considering a home equity loan is that you are using your home as collateral for your loan. If the loan is for a start up small business, this means that you are risking your house and placing the future of your home into the hands of your business. This can be very frightening for a new business owner who has worked hard to establish equity in his home. After all, there is no way to know at this point, how well your small business will or will not do.
The largest fear here is that the business will fail and be unable to make the loan payments. Then the former business owner will either have to take an extra job to pay off the business' debt or run the risk of loosing his house.
Most business startups facing this risk decide to finance only a portion of their startup costs with a home equity loan, leaving the rest of the business debt made through traditional loans that, if defaulted upon. would not cost the small business owner his home.
Irregardless of the small business loan type that you seek and take. If you are the business, then it goes to say the business is you. Your signature will be the one accepting the terms of any loans that you accept. Whether the business exists tomorrow or not is irrelevant to the lenders and does not absolve you of any loan debts.
