It can be difficult to obtain a business loan, particularly if you’re a start-up or small business. If you’re a homeowner, you could address your business funding needs with a home equity line of credit (HELOC). In PART 2 of The Benefits of Leveraging Your Home’s Equity we outline the benefits of a HELOC vs. a business loan.
1. A HELOC is granted based on your personal credit and secured with strong collateral (your home) rather than the assumptions contained in your business plan and weaker collateral (like inventory or receivables).
2. The paperwork required for a HELOC is much less intensive than for a business loan.
3. A HELOC is a line of credit. You can borrow and repay as the money is needed. In addition, you can use it for personal expenses should the need arise.
4. A HELOC has a 10 year duration for draws and repayments, whereas a business line of credit is “on demand” and can be recalled by the bank at any time.
5. For a business loan, there will be an ongoing need to supply the bank with financials and information about your business. There are no reporting requirements for a HELOC.
6. Rates are generally lower for a HELOC and costs are typically minimal (or $0) if the HELOC remains open for over a year.
Securing a business loan is no easy task. That’s why we recommend talking to a lender you trust to explore the different funding options at your disposal. At Pentucket Bank we’ve been helping businesses, organizations and the community since 1891. We recognize that each business has unique goals, challenges and opportunities. To find out how we can help your business grow and succeed fill out our short Business Loan Contact Form.