Borrowing on Mortgage for Business Start-Up

B

BusinessMan

Guest
I am looking for advice on borrowing to start a business.

Currently I am in full-time employment and am in the early stages of planning a business of my own. I will need to borrow some money to do this, and am wondering about the advisability of increasing my mortgage.

I have a fair bit of equity in my home by now, and would be thinking of borrowing about €50k more. This would still leave me with >50% equity.
The logic behind this is that the mortgage rate is lower than most other forms of borrowing, and once I leave work, I have little chance of borrowing more against my home - at a good rate, for a few years (due to lack of income, initially).

I am aware of the risks that this entails, but long-term, the advantages seem to outweigh them ? Any comments or warnings ?
 
Hi Businessman

One piece of advise I got when deciding to go out on my own was to finance the business on its own merits rather than fund it personnaly. The reasoning being that if the company cannot fund itself or service any loans then it is not worth doing in the first place. You also should consider that using your home to fund a business venture may put your home at risk should you be unable to repay the mortgage.

C
 
Hi Businessman

Yes your house is at risk .
If you feel that your business will make the repayments for you put it
in as a loan and pay it back to your self as a loan repayment.
I did and now have a successful business.One thing,, dont tell the bank
it is for a business start up, tell them its for home inprovements.
 
Something that you should look into is a scheme where you can claim back the PAYE you've paid (if you're PAYE of course) over the last few years as seed capital for your business. It depends what type of business you're starting and you don't get the capital straight away though. There was an article on it in one of the Sunday papers last weekend (I think the Sunday Times). There might be details on askaboutmoney somewhere.
 
Your mortgage is your cheapest form of borrowing, so it should be the first place to look.

If the venture is very risky, it will be very difficult for you to borrow to set it up. You may have to get outside investors, which most people don't like.

Set the business mortgage up separately and make sure to pay back the other mortgage first. All interest used to fund a business should be tax deductible whereas there is very limited tax relief avaiable on normal mortgage interest.

Brendan
 
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