Wednesday, July 19, 2006

Is Home Equity Fueling Your Business?

With the rapid increase in housing values in certain markets over the last five years, many business owners relied on home equity loans and lines as a cost effective method to fund their business needs. With home equity lines priced at or near the Prime Rate, it was an easy decision to defend.

In Southern California, the LA Times reported today that June home sales declined by 17.5% compared to the same period a year earlier. Prices increased a mere 6.0% for the same period.

With home inventories on the rise and interest rates following the same pattern, “we expect more markets to see prices flatten or decline a bit in the second half of this year," according to DataQuick President Marshall Prentice.

What does this mean to a business owner? If you are using a home equity line or loan to fund your business, you might need to look to other financing options to provide fuel for your business as the equity in your home is likely to flatten or drop. Also, if your bank has provided you with a business line of credit secured by your home equity, your banker may not be as comfortable approving an increase in your business line of credit.

If your business has receivables, inventory or equipment, now is a good time to evaluate other sources of potential financing. Don’t wait till it’s too late!

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