Why Burden Yourself With Business Loans When You Could Remortgage To Start Up Your Own Business

Whilst many people dream of owning their own business, the start-up costs of such a venture can often be prohibitive. Setting up your own company often involves a substantial injection of capital for premises, stock and other associated costs. With banks ever increasingly reluctant to lend to small businesses, using the equity in your home may be a viable alternative to a bank loan for raising the money that you need.

If you have maintained your mortgage responsibly over a period of time and you have been careful with the property you have bought, you may find that you have a decent amount of equity in your home. Your equity is the difference between the value of your property and the mortgage that is secured on it.

Some people use this equity in order to afford a bigger mortgage to own a larger property later in life, as owning a huge home is an aspiration for many people, especially those who intend on having a family.

But there is another use for that equity. If you wanted to start your own business, you probably won't be able to obtain a loan that is sufficient to fund your initial outlay. Also, as a new business venture is high risk, it is likely to be difficult to find a lender to offer the funding.

By remortgaging, you are able to start your home business, however it is important that you weigh up the pros and cons, and realise the amount of risk that you are taking on by doing so. If your business does not go as well as planned and you do not make enough money to keep up with your mortgage repayments, you could end up losing your home.

When deciding to remortgage it is crucial that you have a good idea that your new company is going to be profitable. Whilst you can never be 100% sure that a business will take off, remember that if it doesn't, it's your home that is at risk. If you can't afford your mortgage repayments you may end up losing your property.

Firstly, are you able to make repayments to your mortgage if your business is not instantly profitable? Many businesses do not immediately turn a profit and it can take months or years to reach a situation where your company is making significant profits. Can you afford to pay your mortgage during this time?

Another thing to consider is that if your remortgage to fund your new business then your business will be indebted until your break even on profits. This is not necessarily an issue, but something to think about.

Making sure that your home is safe should be your primary objective. To this effect, it is vital that you control the risks inherent in setting up a new business. Make sure you work out your costs carefully so you're not faced with unexpected charges and that you reduce the cost of overheads, stock and raw materials as much as you can. If you don't, you may find that your home is suddenly at risk as you can't manage you mortgage repayments.

Getting professional advice can help you to ensure that you are making the right decisions and have thought your plans through thoroughly before you take action, so consider investing some money in this before you make any final decisions.

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