Question added to topic Starting a Business • June 18, 2007
Why is it not reliable to get an equity line of credit (from your own house) to put on your own business? Why is it so risky?
I want to start my own business, and I want to get a loan using the equity from my house. Why do some experts recommend entrepreneurs not start a business using a house's line of credit?
This is an area where you will get many differing opinions. An equity line can be a very viable option in starting a business, just realize that you are putting your home at risk if you default on the loan. This can make some individuals very nervous. Though in reality, when you borrow money for a business, you most likely will have to use your personal assets as collateral anyway. The key is making sure you have a well thought-out business plan and model in addition to being able to "handle the worst case scenario" if the business doesn't go as planned. There's always going to be some risk, the goal is to make it a calculated risk that you've devoted much time and energy into the forethought of the business plan and business model to minimize your risk.