Debt Consolidation Options For Small Business
“If You’re Small Business Needs Additional Capital, But You Don’t Currently Have The Credit or Financial Statement Profitability To Secure Business Financing, Home Mortgage Financing Options May Be Your Best Bet”
In the past, I’ve talked about private mortgages, institutional second mortgages, and mortgage refinancing as strategies you can take to secure additional capital for a variety of purposes including personal debt consolidation and business capital injection.
One of the draw backs to all these options is that you’re getting a lump sum of funds that you may not need all at once and the prepayment options can be fairly rigid or non existent for many of these types of mortgage programs.
Especially in the case of small business owners where the flow of money is not necessarily consistent, the need for more flexible sources of capital are required or preferred.
In the current market, many small businesses are experiencing strained credit with suppliers and cut backs in credit from banks and trade accounts. Longer outstanding payables and delays on making loan and credit card payments create a vicious circle that feeds on itself making the situation worse.
Business financing solutions of any type when you get into a strained credit scenario are almost always going to be more expensive than any type of home equity, many cases by more than double the interest rate. So if you’re committed to the business long term, it makes sense to seriously consider debt consolidation and incremental capital procurement options that can come from the equity in your home.
The one form of home mortgage equity financing we haven’t discussed very much is equity lines of credit that are available for those with fair to poor credit and are self employed. These programs can range in interest rate from 9% to 13%, which can be considerably lower than the asset based lender’s offer to finance your equipment from 2% to 3% a month.
These lines of credit tend to be secured by a second mortgage against the property and allow you to increase or decrease your outstanding balance as funds are required or funds become available.
Now there aren’t many of these programs on the market, and they tend to look at self employed applications on a case by case basis when assessing debt servicing ability, so the eligibility rules will vary from scenario to scenario.
But if you’re self employed, and have a bunch of short term debt squeezing the life out of your business, then this could be a great option to stem the ebb and flow of your cash flow.
If you’re self employed and would like to learn more about the different types of mortgage products that would allow you to consolidate business or personal debt, please give me a call and we can go through your situation together.
About the Author Joe Walsh
I'm a Toronto Mortgage Broker that arranges mortgage solutions on residential and commercial real estate property. With over 30 years of mortgage financing experience, I'm able to quickly assess your financing requirements and provide relevant solutions for your immediate consideration. Joe Walsh Google+ YouTube Channel