Inside Entrepreneurship: Use caution when tapping home equity for startup
Q: Do you have advice about the pros and cons of mortgaging your home to start a new business? What percent of your home’s value should you leverage? If I take out a loan I will be at the full 80 percent of home value. I’m assuming that in this economy I won’t be able to get a small business loan. Any help is appreciated.
– S. B., Washington, D.C.
A: Frequent readers of this column know that I am not a big fan of funding a startup business from home equity and retirement plans.
During the past few months I’ve seen that mortgage brokers have switched their marketing focus from big credit card spenders in need of debt consolidation to would-be small business owners. They imply that borrowing from your home is "smart" and that "your dream business" will easily pay off the increased personal debt load.
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