HOME EQUITY LOANS AND HOME EQUITY LINES OF CREDIT
Should You Pull Equity from Your Home to Start Your Business?
 Start-Ups
and Home Equity
By Kelly Land, © 2006-2008, All rights reserved.
Thinking about starting a home business? The number one obstacle is typically
cash. Even if it's a direct sales type company and you're joining to be a rep -
the costs can be steep. Kits can be upwards of $199! That doesn't count business
cards, postage, office supplies etc.
Many times home business start up costs go on a credit card. This is ok --but
not ideal. If it's small --and you KNOW you can pay it off within a month or
two--then I would say yes. But if not--it could end up costing you SO much more
in the end.
It's easy to "charge-it" with the idea you'll pay it back--but it your business
is slower to get going--you could pay dearly in interest.
This is where a home equity line of credit or a home equity loan can come into
play. Of course--you shouldn't pull valuable equity from your home if you're
just gonna BLOW the cash. This is silly and just puts you deeper in the hole.
That's not your goal is it? The goal is to MAKE money with your business and be
debt free!
BUT--if you can pull some equity out of your home --it could be just the ticket
you need to make your home business dreams come true.
I recently received the following emails from site visitors when I polled the
message boards on home equity loans for business start up.
Here are just two of the emails I got back from those that have taken this
route:
March 2006
"First, kudos to a great site. Thanks. Second, I took your poll on home equity
lines of credit. I did this two years ago in order to start my Mary Kay
business. I was terrified because we had just bought our first home. We'd only
been in it for a year. But I felt like if I could pull out $5000, then I could
really start my business the way I wanted to. I started with eLoans and Lending
Tree. I did get a $7000 line of credit through eLoans.
That was over a year ago and I have since paid of that line and my business is
thriving! I used $4200 of my line to buy all my supplies and inventory. I also
paid for some advertising and phone book listing. It was so worth it--and
getting the loan was VERY easy. I recommend it if you know you want to do a
business and know you will be successful." - Kate Frasier, Greencastle, IN
April 2006
"Hey Kelly! It's me Cindy! Just wanted to say in answer to your poll on the home
equity thing. I recently pursued a home equity line of credit to start my own
candle business. I wanted to make the candles myself. I created a business plan,
so I knew I would need a minimum of $4000 JUST get my feet wet.
We've lived in our home for 7 years and done several improvements. I was stunned
to find out we had over $75,000 in equity! I about fell over. However, I just
wanted about $5000. Ended up getting $10,000. I had a friend do the same thing
to consolidate debt back in 2004. She recommended eloan. I went with them and
had my money within 5 weeks! I am not kidding.
I'm still growing my business and learning. But having a safety net with this
line and being able to pay on it, and then use it again is awesome. If you can
manage the money, have a business plan. I say yes!" - Cindy Hensley,
Philadelphia, PA
So I would say a major key to whether or not this is route for you....can you
manage the money and spend it on your business? Do you have a business plan?
I wouldn't walk blindly and all willy-nilly into something like borrowing
against your home! You have to be responsible with the money and use it for the
intention.
Know what kind of business you are getting not and what it will take to get it
up and running and turning a profit. I know Karen is very successful with her
business now. She makes more in a month than her original investment with her
Mary Kay business.
The other great part of home equity vs credit cards is the fact that the
interest is a complete tax write off! To me --that's an incredible reason to
venture in that direction for start up money.
Back in 2000, I desperately needed $3400 myself to get MoneyMakingMommy.com
professionally designed and purchase software and a new computer. I was working
in radio and didn't have that kind of money just sitting around. I decided to go
the route of home equity after talking to a friend that was an accountant. Welp....it's
6 years later and I am SO happy I made the decision to apply for that home
equity loan. I took out $5000 and paid it off and MoneyMakingMommy.com is
stronger than ever. (Having a decent computer helped A LOT!!!)
You can apply for a home equity loan at any bank in your home town, or do it
right online through a bank or one of the great mortgage loan websites on the
net. There are many to choose from!
Good luck and let me know how it goes!
Copyright 2006-2008. All rights reserved. Any reproduction of this article in whole
or in part without written or verbal permission is strictly prohibited.
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