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How can I leverage the equity in my home to start a new business and limit risk & cashflow during the startup phase?
Responses
Hi Daniel,
We would recommend that you withdraw sufficient equity from the home to cover all start up costs as well as sufficient funds to cover the first twelve months cashflow.
As soon as possible arrange an overdraft against the business with a different lender to your home loan.
Hope this helps & happy to discuss further at any time.
Rebecca - Awesome Lending Solutions
All the very best with your start up.
Ideally lenders have a ceiling on the cash out you can have on your home loan without stating purpose.
If your cash out is under this ceiling you can go ahead and withdraw funds and put it towards the purchase without the hassle of explaining the use of funds.
If you need more funds, you will need to consider a business loan backed by your home as security.
Most business loans are 60-70% LVR and banks expect you to fund the rest of the purchase or start up.
Projecting your cash flows and estimating your costs for the start up properly in advance will help you understand the risks. I highly recommend undertaking this exercise which will help comprehend total funds required.
Business purchases / start ups require comprehensive discussions and am happy to have a chat if it helps you.
Cheers
Hi Daniel,
This would depend on how much equity you have in your property (or properties) vs the costs of setting up your potential business.
Of course when you start up a business there would be a tax conversation to be had with your accountant also. Therefore I suggest you speak to your accountant in regards to how your loans should be best structured (access funds from home or get a business loan) to best suit your tax strategy also. That's very important you know this.
There are a few lenders out there that allow you to maximize the equity in your home for investment purposes such as starting up a business if you need max cash out. Discuss in detail with a finance broker if you want more options.
Hope this was helpful, happy to assist.
All the best,
Daniel Huy
Hi Daniel,
In terms of limiting risk, you need to ensure you consider the insurance requirements that will arise from your business activities, and factor those costs into your start up cost estimate.
If you don't have proper insurance in place you could potentially put your personal assets I.e. your house at risk.
All the best!
Charles
As a specialist providing credit advice and finance solutions for self employed and business :-
1. Always secure finance before you start - lenders can see what you see in your business and are concerned about how they get paid.
2. There are lenders who will provide to 85% LVR for "business purchase"- others only provide $50k - $200k.
3. You still need to have a good story about why you want to use - when starting a new business.
The review is a simple process and to start its a 10 minute conversation to understand the numbers - then I would come back with how I can help. From there its a matter to backup the details with supporting documents and show income, equity, prior ability to repay.
Regards insurance, you can get a "no questions asked" Loan Protection Policy which covers borrowers for life events, but I can refer for more specialist needs.
PS - Have you had your business plan reviewed with a business advisor ?