Business Financing

[Frinkenstein]

Hey guys,
So, I have an idea for a new business. My question involves financing and how that works for a person like myself.

The relevant info that I can think of:
-I bought a condo that I purchased for $144K and I put $12K down and have been making mortgage payments for about 6 months.
-The condo has appreciated by $100K since I bought it.
-Other than that, I have savings of about $11K.
-I am leasing a car for $383 per month

My question is how a business loan from a bank would work in this case:
-Would they give me much of a loan? What would my collateral be if my condo is already being used as collateral on the mortgage?

I wasn't sure about that... Hence, my initial thought was that to start a business I would need to sell the condo and take the profits and my savings and start my business. That way, I could either avoid a loan altogether or perhaps just have a small loan.

Thoughts?

Thanks for any help.

[Colt McCoy]

You could refinance the condo and get bigger mortgage.

[AggroFish]

http://www.sba.gov/financing/sbaloan/snapshot.html

[Frinkenstein]

[ QUOTE ]
You could refinance the condo and get bigger mortgage.

[/ QUOTE ]

If I did this, wouldn't I essentially be mortgaging the start-up costs of my business over the life of my mortgage (25 years)?

If so, that doesn't sound like a great idea.

[elus2]

You could also get a home equity line of credit.

[savman]

100k appreciation in 6 months is suspect at best. if u really do have ~110k equity in your home there are ways to access this money (that arent amortizing the equity over 25 years) providing you have enough income. need more information. need more specifics on annual income, as well as all your financial obligations. also, what type of business are you looking to start? How much capitol do you anticipate? If u need 300k to start day trading or something you are likely SOL; however, if u want to buy something that can be collateralized then 300k is within the realm of possibility.

[Frinkenstein]

"100k appreciation in 6 months is suspect at best."
-Nope... I live in Calgary! It was a condo conversion project. When I put my money down last Dec, they were selling for $144K (I believe it was underpriced). When I moved into it in Feb, it was worth $40K more easily. Now it is worth $100K more plus or minus a few K. Calgary had a crazy year in terms of price appreciation and that is coupled with the fact that I got an excellent deal.


"if u really do have ~110k equity in your home there are ways to access this money (that arent amortizing the equity over 25 years) providing you have enough income. need more information. need more specifics on annual income, as well as all your financial obligations."
-$54K per year. Financial obligations include car payments as stated above and mortgage payments along with the usual cable, phone, condo fees, etc.

also, what type of business are you looking to start?
-Don't want to give that away at this time, but it involves selling a product to a sector of the general public as well as corporations. It would require a delivery van (cube van) as well as a smallish to small/medium sized warehouse with a small retail storefront. I would aquire the product for free and sell it. Although, I would also sell secondary products, that I would need to purchase from a supplier, but those costs would be relatively minor I believe.

How much capitol do you anticipate?
-This is what I do not know at this point... Ideally, I suppose I'd lease a cube van and retail/warehouse space. I can't imagine the start up costs being more than $100K, but I could be wrong...

I appreciate any advice/help!

[Colt McCoy]

[ QUOTE ]
[ QUOTE ]
You could refinance the condo and get bigger mortgage.

[/ QUOTE ]

If I did this, wouldn't I essentially be mortgaging the start-up costs of my business over the life of my mortgage (25 years)?

If so, that doesn't sound like a great idea.

[/ QUOTE ]

Why not? Mortgage rates are probably lower than anything else you'll get and you can always pay it down early.

[SossMan]

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
You could refinance the condo and get bigger mortgage.

[/ QUOTE ]

If I did this, wouldn't I essentially be mortgaging the start-up costs of my business over the life of my mortgage (25 years)?

If so, that doesn't sound like a great idea.

[/ QUOTE ]

Why not? Mortgage rates are probably lower than anything else you'll get and you can always pay it down early.

[/ QUOTE ]

yeah, you will be able to borrow w/ a home equity line much cheaper than borrowing with a startup small business loan/line.
plus, so long as you don't have a prepayment restriction on the loan, you can always pretend like you have a 10 year amortization period and make extra payments.

[SFBAY23]

[ QUOTE ]
http://www.sba.gov/financing/sbaloan/snapshot.html

[/ QUOTE ]

Good link. For the OP, there are many variables. Bank loans/lines terms and requirement will differ depending on your biz formation. E.g. are you and LLC, Class C, general partnership? Check out the SBA site for a lot of info. Good luck!