Is it a Good Idea to Get a Home Equity Line of Credit (HELOC)
All it takes is one good idea to generate big results, so you may be wondering whether getting a home equity line of credit for your business or nonprofit is the right catalyst for you. The more you learn about this key business tool will help you decide if it is the best option for you.
What You Should Know about a Home Equity Line of Credit
Lining up financing or a line of credit is one of the most important things an owner or executive director can do for their organization. Looking into a home equity line of credit (HELOC) is one excellent option.
Most often, businesses obtain a home equity line of credit from a commercial bank. It works like this: the bank will give you a line of credit against the equity of your home. You own it, so why shouldn’t you be able to use its value to save your business? However, you should know that there are some pitfalls.
What are the Disadvantages of a Home Equity Line of Credit?
If your business fails you still have to pay the HELOC back.
Therefore, even with no business, you are still responsible for repaying the money. But how are you going to do that with no income?
Your house is on the line as well.
Not only will you lose your business, but you will have nowhere to live if you default on this short term business loan.
It’s likely that your personal credit score will go down due to the debt.
This happens whether you use the money in your HELOC or not. With a lower credit score, you will find it difficult to work with vendors, make major purchases or obtain a small business loan now and in the near future.
Your wife/husband will have to sign for the HELOC along with you.
And if they don’t agree, you cannot get a HELOC. If your spouse is listed on the deed of your home, he or she stands to lose everything as well. This includes the effect on their credit score too. As a result you will be, in effect, dragging your partner down with you.
Is There an Alternative to a Home Equity Line of Credit?
Getting a HELOC is not a bad idea but there is a better way out of your business troubles. The answer lies with alternative lenders, like Financing Solutions (www.financingsolutionsnow.com).
At Financing Solutions, you can get a business line of credit up to $100,000. You can use this money for any business purpose, such as meeting payroll, making purchases and handling emergencies.
What Are the Benefits of a Financing Solutions Line of Credit?
- They do not ask for personal guarantees for their LOC (except in the case of fraud).
- If your business or nonprofit closes down through normal business downturns or other factors beyond your control, then there are no personal repercussions.
- It is really easy to get in place. You can start by completing a two minute online application.
- There is no cost to set up your line of credit and nothing no cost until you use it.
- When you do need to withdraw funds, it is very inexpensive, making it competitive with a traditional HELOC.
- You do not need a spouse to sign.
- Getting a line of credit from Financing Solutions does not affect your credit score. It also will not affect other financing you have in place.
- The world of small business is unpredictable. Every business or nonprofit should have a line of credit, just in case.