The
credit
crunch
means
that
many
businesses
are now
struggling
to
obtain
finance;
this has
meant
that
more
entrepreneurs
are
resorting
to using
their
house as
security
for
their
business
finance.
However,
the
expected
dip in
house
prices
is going
to cause
more
problems
when it
comes to
funding
a new
business
or
expansion.
If you run a business and have secured a
loan on your house; you could potentially
find yourself with a house that does not
cover the loan costs. If you have a £200k
business loan secured on a £210k house, then
it only needs a £10k drop in house prices
before your security in insufficient.
The problem is that with lenders restricting
the availability of borrowing, many business
owners are left with no option but to use
their homes for security; increasing the
risks to them if the business fails.
If your house price is dropping, lenders may
start offering you smaller amounts or higher
interest rates to ensure their security. If
you are remortgaging to fund a business, you
are likely to get much poorer rates than a
year ago, and may only be able to remortgage
a smaller percentage of your house value.
Hopefully thing will start to turn around
sooner rather than later, but if you are
looking at financing your business (whether
new or expanding) you should be especially
careful about what you decide to do; and
beware of putting too much risk on your
personal finances.
If you are struggling to obtain finance, why
not see if our Business Finance service can
help you to obtain funding from a range of
business services?
