Entrepreneurs universally are looking to fund the considerable start-up and operating expenses that come with starting a business.
If you are looking for funding sources, is using your home equity a good option? There are pros and cons of using home equity to fund your small business. Here is a look at a few of those factors.
First, it is important to understand the several ways in which you can leverage a home mortgage for cash. The first is by taking out a second mortgage on the home itself. The second is to refinance an existing home loan and taking cash out that can be used for other purposes. A third is to create a home equity line of credit (HELOC) that is essentially a credit card with which you tap into a portion of the home’s value to borrow money. There are pros and cons for each option, and any of them can provide you with the necessary funding, provided you meet the criteria.
But, while using your available home equity may seem like a good idea, is it the best way to fund your small business? Here are a few questions to consider with your financial advisor:
One of the most troubling potential results of using home equity to finance your business is the possibility of loan default. If cash flow issues should make it impossible for you to repay your home equity loan, you might find yourself in foreclosure. This possibility, however remote, keeps many entrepreneurs from choosing this funding option.
A Better Solution
Many entrepreneurs have found a better way to fund their dreams by turning to Benetrends, a trusted partner for your business needs. Benetrends pioneered a program whereby you can leverage your 401(k) and IRA retirement funds to get the class flow you need to start your business. Using your 401(k), you can have the cash you need in a matter of days without incurring tax penalties or early withdrawal fees. To learn more, watch the webinar: How To Use Your Retirement Funds To Buy A Franchise Or Business.
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Information provided by Benetrends Inc. is not intended to be used as legal or accounting advice, or as the sole basis for investment decisions, nor should it be construed as advice designed to meet the particular needs of an individual investor. Please seek the advice of legal or tax professionals, as appropriate, regarding the evaluation of any specific information, opinion, advice or other content.
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