Starting a new business takes a lot of work, but there’s one part of it that shouldn’t be that difficult: getting a loan.
Banks and other institutional lenders generally aren’t thrilled to provide loans for new ventures, as it’s seen as too much of a risk.
New business owners then have to rely on their own resources to get started, which often isn’t enough to truly hit the ground running.
In these instances, tapping into your home equity may be a smart option. Let’s look at the benefits of using home equity to start a new business, and how to access this cash with a hard money lender.
What is home equity?
Home equity is the portion of your home or investment property that you own, and is not owed to a mortgage lender.
You can calculate your equity by taking your total mortgage balance and subtracting it from your property’s current market value.
For example, if your property is worth $400,000 and you owe $200,000 on your loan, you have $200,000 of equity.
As you pay down your loan each month, you are building equity in your property. But you also build equity if surrounding home prices are increasing and push up the value of your property.
This has been the case in the past few years especially, as home prices steadily increased and homeowners found themselves with record amounts of equity in their homes.
Home equity is a precious asset, but to access it, you have to take out a loan. The right lender can help you tap into your equity for your business.
What’s your loan scenario?
Benefits of using your home equity to start a new business
Using your home equity to start a new business can be a quick, easy way to secure financing and get your business up and running.
The following are the top benefits of using equity to start your new business.
Use the funds any way you want
Many business loans have restrictions on how and where you use the funds, and even on the types of industries that qualify.
By cashing out on your home equity, you can use the money in whatever ways you choose.
This can include purchasing or leasing property, buying equipment and inventory, hiring staff, or any other purposes.
It’s easy to qualify
Because you’re providing the collateral, it’s easier to qualify for these types of loans.
However, traditional lending institutions still require that you meet strict credit score, income, debt, and loan-to-value ratio requirements.
The easiest way to cash out on your home equity is with a hard money lender.
Can access large amounts of cash
If you have a lot of equity built up in your home or investment property, you can potentially borrow a large sum of money.
Keep in mind that while you can’t access the full amount of equity in the property, depending on your lender’s LTV requirements you should be able to access a large portion of it.
And remember, this cash can be used for whatever purpose you need for your new business.
Hard money lenders make the process simple
The “red tape” of institutional lenders can make cashing out on your home equity much more difficult than it needs to be because they must follow certain requirements.
With a hard money loan, private investors fund deals based on the value of your assets, rather than requirements set by the federal government.
That’s why hard money lenders don’t require the same strict qualifications as institutional lenders and can set a more flexible loan agreement.
Because hard money lenders are free to focus on the merits of the deal, rather than credit score or other restrictions, they can approve deals quickly.
Marquee Funding Group always looks out for a borrower’s best interest. We make the process simple to tap into home equity without requiring borrowers to pay off their good low-rate mortgages. Marquee can fund cash-out loans in the 2nd, 3rd, and even 4th position.
Is using home equity for a new business the right option for you?
The decision to use your home equity for your new business is personal since you have the freedom to do whatever you’d like with your equity.
If you believe in the future successes of your new business, using your equity can be the smartest, simplest choice to access funding.
Generally, finance experts advise against using equity for one-time expenses that will have no ROI, such as a vacation.
But if you’re using your equity to start your new business, you likely intend for this pursuit to be lifelong and profitable.
If you have a strong business plan, reach out to a hard money lender to have them take a look at your deal.
Hard money lenders aren’t just lenders, but partners in your investments. They want to build a relationship with you and help you succeed in many deals to come.
They can take a look at your deal and leverage years of experience to quickly determine whether they want to move forward.
How to use home equity to start a business
The three most common ways to tap into home equity are with a cash-out refinance, home equity loan, or home equity line of credit.
The most popular option, especially in the current market, is a cash-out refinance.
To cash out refinance, you will take out a new, larger mortgage that replaces your existing mortgage, and receive the difference as a lump sum of cash.
Then, you’re free to use this cash to put a down payment on a new property for your business, for business expenses, staff, or any other reason.
There are zero rules about how you choose to use these funds.
Marquee Funding’s 2nd and 3rd mortgage products can offer borrowers a way to tap into their home equity while still keeping their global interest expense below market rates.
Submit your loan scenario today to Marquee Funding Group
The most important part of tapping into your home equity is finding the right lender.
Not all hard money lenders are the same. Marquee Funding Group is the ethical standard for hard money lenders.
In addition to cash-out refinance, we also offer rate-and-term refinance options, and the following loan options:
- Single-family, multi-family, commercial, industrial, and land loans
- Owner-occupied and non-owner-occupied consumer or business purpose
- Construction, ground-up, fix-and-flip, or fix-and-occupy loans
We are able to provide funding in as fast as seven days, with an immediate review of your loan scenarios.
We look forward to building a relationship with you for many successful deals to come.