Monday, December 20, 2010

Small Businesses Use Homes For Equity Loans, Lines Of Credit and Collateral: Home Value Decline Limits Small Business Owner Credit Availability

From the Federal Reserve Bank of Cleveland Economic Commentary, "The Effect of Falling Home Prices on Small Business Borrowing" by Mark E. Schweitzer and Scott A. Shane:
Because small business owners may rely heavily on the value of their homes to finance their businesses (through mortgages or home equity lines), the fall in housing prices might be one of the causes of their difficulty. We analyze information from a variety of sources and find that homes do constitute an important source of capital for small business owners and that the impact of the recent decline in housing prices is significant enough to be a real constraint on small business finances.

Figure 1. Percent of Households with Home Equity Debt

Read the complete article here.

1 comment :

  1. There are other ways to finance small business other than borrowing money and making your house as collateral. All you need to do is search and learn how it works. There are tie-ups which you can make other company as your partner in a certain project and there is also receivable financing which can protect your share and interest and increase your working capital. In business world, you can’t just stick to plan A there should always be, B, C and D.