Entrepreneurs Can’t Count on Equity for Loans
Entrepreneurs can no longer count on what used to be a primary source of start-up funding — home equity.
“As the big guys are doing better, people ask, why not the smaller firms? Well, this is a huge part of the reason,” says William Dennis, Jr., a senior research fellow at the National Federation of Independent Business in Washington, D.C.
Owners who can tap into home equity are unable to borrow as much as before. Even business owners who want to rely on existing business properties as collateral are being rejected for loans.
“The value of the commercial building and the home — the combined net worth of the business and the owner — has been reduced, so collateral becomes more important in order to make sure that it’s in line with the loan,” says Kathie Sowa, a commercial lending executive at Bank of America.
Source: The Wall Street Journal, Emily Maltby (04/15/2010)
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