Home Equity Loans & Creative Small Business Financing

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415

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You don’t have to have investors or a traditional business development bank loan to start your own small business refine360.com If you own a home or have the credit to open revolving credit card accounts, your small business financing could be a reality ricoshays.com A more traditional approach is the home equity loan rockapulco-nyc.com Banks usually offer home equity loans for 125% of the property’s fair market value or FMV.


Keywords:
home equity loans,business financing,second mortgage,2nd mortgages,home equity line of credit,home equity rates,prime home equity loan,second mortgage loans,refinance,cash out,credit line


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You don’t have to have investors or a traditional business development bank loan to start your own small business rockawaii.com If you own a home or have the credit to open revolving credit card accounts, your small business financing could be a reality.

The secret to using credit cards for small business financing is to open the credit cards under the business name saintmarcarabians.com If you have business credit cards, the IRS allows the deduction of every single penny of interest from those credit cards.

David Newton is a professor of entrepreneurial finance at Westmont College in Santa Barbara, California scliew.com He says there are basically two ways to use credit cards to finance a small business: 1 signgalonline.com Asset acquisition such as purchasing equipment and supplies, and 2 southernstyleproductions.com Cash on hand as capital starwinmedia.com He does; however, consider credit cards as an extremely risky way to finance a small business

“The use of credit cards should be replaced as soon as possible by more traditional bank financing and/or leasing arrangements, once the firm has reached the break-even point and monthly sales receipts can cover normal COGS (cost of goods sold) and overhead expenses.”

A more traditional approach is the home equity loan stevestonvillagegallery.com Banks usually offer home equity loans for 125% of the property’s fair market value or FMV stickerduderacing.com For example, if your home is valued at $300,000, and your mortgage balance is only $100,000, there’s already $200,000 of equity studioyousb.com The bank would loan you the amount of the equity plus an extra 25% or in the previous example, $75,000 thepreachersplatform.com You would then have $275,000 to start your small business.

But, the credit card route allows deduction of all the interest, while the IRS limits the amount of the home equity loan for purposes of deduction titostouch.com IRS publication 936 limits the amount eligible for interest deduction to $100,000 or the actual value of the home minus the mortgage balance, whichever is less.

Entrepreneur.com shows there are down-sides to home equity small business loans vegawebproductions.com “You may be asked to pay up-front fees, closing costs, or annual fees wmmfsg.com Some home equity loans also require large balloon payments at the end of the loan, while others require higher monthly payments instead 13on.com If you choose a loan with a large balloon payment, be sure you know how you will cover the expense 2join4free.com In some cases you may have to borrow more money to make the balloon payment allamericanpromotion.com “

The biggest risk using your home as collateral is the potential loss of your home is the business fails or the loan defaults.

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