| Money is essential for all businesses to start up, | | | | percentage to banks. Thus, you must prove your |
| operate and expand. The Small Business | | | | creditworthiness with the bank, which requires |
| Administration (SBA) states that while poor | | | | excellent credit. And, you must meet the complex SBA |
| management is cited most frequently as the reason | | | | eligibility criteria. |
| businesses fail, inadequate or ill-timed financing is a | | | | Home equity loans (second mortgages) are |
| close second. They go on to say that when looking for | | | | cost-effective ways of getting startup capital because |
| money, you must consider your company's | | | | they generally offer lower interest rates, the choice of |
| debt-to-equity ratio--the relation between dollars you've | | | | a fixed mortgage rate or an adjustable rate mortgage |
| borrowed and dollars you've invested in your business. | | | | (ARM) and shorter repayment terms and lower |
| The more money owners have invested in their | | | | payments than other business loans. Unlike business |
| business, the easier it is to attract financing. | | | | loans, it is easy to qualify for a home equity loan, even |
| Ideally, it's best to start your business on money you | | | | if your credit is not perfect. Even if you already have a |
| have in savings or otherwise liquid. But, like most | | | | second mortgage, you may want to cash out on |
| people, you probably don't have that much money | | | | equity through mortgage refinancing because many |
| available and you'll need a loan. About the only way a | | | | times, the attractive rates and flexibility of second |
| startup business can get a bank loan is through one of | | | | mortgages make more sense than to refinance your |
| the loan programs offered by the SBA, a federal | | | | first mortgage, especially if your first mortgage rates |
| agency that doesn't actually loan money directly, but | | | | are good. |
| rather guarantees the payback of a certain | | | | |