Got Capital? Why Business Owners Seek Home Equity Loans
Whether you need to protect your business cash flow during difficult times, or keep a struggling company afloat until it’s fully operational, there’s a good chance you’ll need business capital.
Applying and getting approved for a small business loan can be a long and difficult process – especially if you don’t meet the bank’s stringent criteria. Fortunately, the equity you’ve built up in your home can provide exactly the funding you need.
Borrowing from the Bank Can Be a Struggle
Banks don’t always make it easy for new or even experienced business owners to borrow money. Since their primary concern is how big a risk your business represents, they typically perform a risk assessment to determine:
- Whether you qualify for a new or business expansion loan
- What the interest rate should be, and
- What terms and conditions will apply
A large part of the bank’s qualifying process revolves around how well you satisfy certain borrowing criteria. Often referred to as “the 5 C’s” of credit or lending, these criteria include:
- For business loans, this includes any relevant experience you may have.
- What your credit history says about your ability to repay your loan.
- Includes business liquidity, growth, profitability, and cash flow figures or projections.
- Any assets you may be using to secure your loan.
- Terms designed to keep the bank’s loan risk to an acceptable level.
If it sounds like a lot of work to convince your banker to approve your business loan, that’s because it often is.
Alpine Credits, on the other hand, makes it easy to use your home equity to get the business funds you need. You may even be able to deduct the interest on your home equity loan as a business expense.
Writing Off Your Home Equity Business Loan Interest
It’s not unusual for new and experienced entrepreneurs alike to borrow business cash for the purpose of:
- Bridging short-term gaps between revenue and expenses
- Keeping their business running during a seasonal downturn, or
- Covering overhead costs when a health or economic crisis temporarily suspends operations
So it’s nice to know that, in many cases, you can “write off” the cost of a loan used to cover business expenses.
For example, even though the interest you pay on a mortgage loan isn’t normally tax deductible, part or all of the interest on your second mortgage or home equity loan may be if the money is used to cover business expenses.
Any interest charges your business pays to generate income, in fact, are usually deductible against that income on your business tax return. Just make sure you get advice from an accountant and keep records to show how money borrowed was used for your business.
So, what are the key takeaways?
- Deducting business loan costs from business income is a valuable tax benefit.
- It may be challenging to qualify for a business loan from a bank.
- Homeowners can take advantage of a home equity loan for business capital
Remember: An Alpine Credits home equity loan can provide the financing you need to support or protect your business – regardless of your credit, age, or income. Apply online in 3 simple steps, and we’ll get your loan approved in as little as 24 hours.