Will Your Home Equity Serve As a Small Business Loan?
A Home Business Article Contributed by Donna M. Brown
A Small Business Loan Can Help Finance Your Independence
America is often referred to as the land of opportunity and a small business loan can be key to turning your opportunity into a reality. New technological developments encourage people to continually look for new, better, faster, easier ways to enhance our daily living. Many people are deciding they would like to work for themselves. A small business loan can make that happen.
What are You Willing to Risk for a Small Business Loan
It's not easy to get financing for a small business loan, but home equity loans just might be the answer to your financing needs.
Why would you want to apply for a home equity loan? Because you believe so strongly in your well researched business plan and opportunity that you are willing to take this risk - investing the equity in your home - in lieu of a conventional small business loan.
A home equity loan is easier to obtain than venture capital money and traditional commercial loans. Don't forget, the payments and interest are tax deductible.
The bad news is, you had better be very sure of your bet because when you use a home equity loan for a small business loan, you are suddenly very personally invested.
Consider reducing the risk by only financing a portion of your startup costs with a home equity loan. Seek a small business loan to finance the rest.
Home equity loans appeal to many small business owners because rates for such secured debt can be significantly lower than those obtainable through a traditional small business loan.
Will a Home Equity Loan Replace Your Small Business Loan?
If you use the equity in your home for start up costs, you can consider seeking what's known as a business administration loan. Such a small business loan serves the purpose of obtaining cash quickly for operations, not for startup capital. Smaller amounts are thus available through a business administration loan.
The assumption of personal risk when you choose to use a home equity loan to start your business is not one to be considered lightly. Discuss the prospect with your partner. Pretend you are presenting your plan to a bank when you present it to your personal partner or other family members. If he or she is adamant about wanting to keep personal finances separate from the business, respect that - it could save you some serious heartache in the future should your business adventure fail. Talk about alternative options and your partners' reason for hesitation.
Remember, if you are worried that foreclosure could loom around the corner for you, you might be assuming too much of the risk. Reassess your risk and seek lending opportunities that will allow you to borrow only a portion of the startup costs against your home.
The tax advantages of a home equity loan may or may not offer a significant enough incentive to take out a home equity loan. Only you can assess the benefits and risk based on your best judgment backed by homework and facts.
