Title: Using a home equity loan to start a business
Headings: Using a home equity loan to start a business
Using a home equity loan to start a business
Understand the differences
Home equity financing is easier
Lower interest rates
Flexible borrowing
Types of businesses to use home equity financing

Content: Flexible borrowing
Money from a home equity loan or line of credit can be used any way you wish, while business loans are often restricted in their use. The interest on a home equity loan or HELOC may be tax deductible and you don’t have to pay it down to zero every year, as most business lines of credit require, says Casey Fleming, author of “The Loan Guide: How to Get the Best Possible Mortgage.” Interest paid on home equity debt can generally be deducted up to $100,000, or $50,000 if you’re married and filing separately, according to the IRS. Interest paid on bank loans, personal loans, credit cards and other types of loans isn’t deductible. But that flexibility with home equity borrowing comes at a cost. When pledging your home as collateral, the debt generally can’t be discharged in bankruptcy if the business fails, Fleming says. “ And you won’t be able to refinance or consolidate until you have at least two years of profits under your belt,” as shown on your tax returns, he says. “If you do use a HELOC to finance your business, pay vary close attention to making sure the business is profitable as quickly as possible,” Fleming says, “and put yourself in a position to refinance or pay off the debt as soon as you can to mitigate the risks to you personally.” Types of businesses to use home equity financing
Risking your home on a business that typically has a lot of risk associated with it, such as a restaurant or retail business, can backfire if you don’t make enough money to repay the loan.