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Old 7th August 2006, 12:35 PM   #1

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Default Can Your House Be Used As Collateral for Business Start-Ups?

Honestly, I think I have a good business plan and I plan on being very successful, but I am aware that even the best laid plans can fail ..

I read somewhere that you need collateral .. as a mother putting my house as such is frightening.

I wonder how it works if your business does fail .. do they give you time to try and sell everything so that you don't because out of work and homeless?

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Old 7th August 2006, 02:00 PM   #2
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If you put your house up as collateral and the business goes bust, yes, you could lose your house.

Most mortagage lenders will try to work with you because it's cheaper for them to keep you in the house and try to work out the loan than to foreclose, but there's no guarantee, and they're not obligated to do so.

Personally, I would never, never, never, never use my house as collateral on a new business loan.


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Old 7th August 2006, 04:07 PM   #3

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ooh .. good to know ..

I don't think I would use my house either. When I read that suggestion somewhere I was thinking to myself, "that doesn't sound like a good idea."

thanks for the reply

other suggestions?

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Old 7th August 2006, 06:43 PM   #4
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First, first, first.......the only thing required to make a go at a business is desire. DESRIE will sutain all things. Remember the movie RUDY?

Don't be dooped into the "traditional" plan where you have to borrow money.

In all of the businesses I have had I have never borrowed one red cent.


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Old 13th August 2006, 05:06 PM   #5
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Never put up for collateral for business you donít want to loose. Any business is a tough risk and the majority fails within the first year. Donít risk what you have now for a remote future possibility.

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Old 15th August 2006, 06:53 AM   #6

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Getting a loan secured on property is always a risky business.

The questions which arise are how much money does the business need? Is it more than the value of the house - with the rest coming from a bank?

If the money required in the business is less and it only requires a certain amount of working capital you could always get a re-mortgage, mortgage or secured loan and form a Limited Company.

In this structure you could hold the capital in a personal account (something like a building society - but go for a high interest bearing account) and drip feed the money to the Limited company by way of 'a director loan'. In this way the limited structure of the company protects the Director (i.e. YOU) by being "Limited by liability".

Speak to an accountant if you're unsure - but as always weigh the risk aganst the potential benefit

Good Luck

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Old 29th August 2006, 01:16 AM   #7

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It really depends on your situation and your appetite for risk. Keep in mind that if you stop paying the mortgage payments now you lose the house anyways. Which if you were running a business fulltime and it went belly up you still have to make those mortgage payments.

If you were taking financing for the business, and it was at a monthly payment you could currently bear from a job and you were not quiting it, then the loan does not add a whole lot of risk to your house.

Remember to consider the options before making any decision that could impact you in such large ways.

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Old 12th September 2006, 09:03 PM   #8

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Thumbs down Cross Collateralization

This is the term used for residential properties and other assets not related to the business but used to secure the loan.

Most business fail in the first 2 years and you need to ask if you are prepared to lose your home? Lets face it every business looks promising at the outset and no one plans to fail but the odds are stacked up against you.

Why not look for partner who can put in cash?

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Old 1st October 2006, 07:06 PM   #9

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Why put it up?
How much do you need for your new buisness?
If you have equipment to lease you can.finance your new company without leverging your house.

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Old 20th September 2010, 08:20 AM   #10

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Originally Posted by mktgbiz View Post

First, first, first.......the only thing required to make a go at a business is desire. DESIRE will sustain all things. Remember the movie RUDY?

Don't be dooped into the "traditional" plan where you have to borrow money.

In all of the businesses I have had I have never borrowed one red cent.

I know this may be an old thread but this is an important quote. Most people think that in order for an online business (or most types of businesses) to be successful that you have to get some type of startup money first. Granted, there is some startup costs involved but it's usually less than $10 dollars, $2 for the domain from yahoo and $7 for hosting from Godaddy.com. Than after that's setup just make sure to take full advantage of the free marketing online by posting on forums, blogs, and article directories. Also in addition to that, be sure to create lots of unique content and you'll be off to a good start.

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