Home Equity Lines of Credit - NOT For Your Business

Business Articles | March 17, 2009

There is a way for most any business to obtain a line of credit to suit their business needs these days. There are lenders who specialize in offering bad credit business loans to those who specialize in offering small business loan or credit. These lenders fill in the gaps traditional lending institutions leave out.

Traditional lending institutions, such as banks, rarely offer a line of credit to a business or individual with less than good credit. Non-traditional lenders will offer a higher-interest business line of credit that may need to be secured with some soft of collateral. An individual can usually get a home equity line of credit regardless of bad credit, since the loan is secured by the equity in your home, but this balance will show up on your personal credit and is not a recommended business credit strategy. This is also a big business practice mistake. You don’t ever want to commingle your personal assets with your business assets.

A few of the disadvantages of a home equity line of credit are:

· This will lower your personal credit score.

· The balance will appear on your personal credit report

· You will pay a higher interest rate.

· You will pay higher fees and penalties.

· You are more apt to have a pre-payment penalty.

· You will have to put up some form of real estate for collateral.

· You will be charged appraisal costs and possibly application fees.

A home equity line of credit is usually secured with the house you own. Some people use their home equity line of credit to remodel or add on to their home, thus raising its value and allowing for a higher line of credit. But at the same time they are lowering their personal credit score, which wouldn’t happen had they used a line of business credit.

You can also get an unsecured business credit line, business credit cards, and other unsecured business credit, if your business has a solid credit history. Individuals can also sometimes get an unsecured line of credit, but businesses with good business credit can get a much higher limit on an unsecured line of credit.

A few of the advantages of an unsecured business line of credit are:

Balance will not show up on your personal credit report
Increases your personal credit score
You will get a higher credit limit than any personal loan type.
You will get lower interest rates.
There are no application fees.
No appraisals or appraisal fees.
There is no collateral required.
Funds can be used for any business reason.

If you are running your business off of your personal credit history, STOP IT IMMEDIATELY! Find out what you need to do to borrow money as a business successfully. The additional resources business credit can give you are worth the additional steps necessary to start building business credit.

Article Tags: Home Equity Line, Home Equity, Equity Line, Personal Credit, Business Credit, Unsecured Business

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ABOUT THE AUTHOR

As the Nations Leading Expert in Business Funding, Pat Gage has created a system for raising unlimited money for any business. The system is called “10 Steps To Money®” and has assisted many of his students and himself in raising hundreds of thousands of dollars for their businesses. Pat is not only a sought after business funding expert but also a national speaker and frequent radio show guest. For more information on any topic discussed, visit Pat Gage’s site at http://www.10StepsToMoney.com.