I have been wanting to put up a brick and mortar business of my own but I don't have much budget to do so. We have just bought an empty land along a busy high way and I already have a business idea in mind. Now my dad is proposing that I put our own house and lot on mortgage with the bank so I could borrow a hefty sum in order for me to begin my business plans. I wouldn't want to risk my only asset and valuable home for something which I'm not really sure would work out well though. If the bank would accept the lot where I plan to put up my business in as mortgage, then I would be willing to push through with it. I just don't see myself putting the house we live in under mortgage at all. Do you think it's really wise to put your one and only asset for a business venture that hasn't even started yet?
It all depends on what kind of figures we are talking about here. But in general I would recommend trying to figure out a way so you don't have to use your house. Negotiate with mulitiple banks, see if you can get some investment loans from other sources (the government? family? smaller banks etc.)
Is the reward worth the risk? Nobody can really answer that for you. What exactly are you risking? What exactly is the most likely reward in the event that it does work out? Is it all worth the stress, headache and time, or will there be so many advantages that it's all worth it in the end?
I also have a lot of questions in my mind but for me, if I would only end up going crazy over trying to figure out how to pay a hefty sum of loan with the constant fear of losing the house I've lived in since I was a kid then it's not really worth it. I'm not as brave as my dad when it comes to applying for loans especially if it means facing the risk of losing my most valuable asset. I would love to open up a business of my own but I would rather let that vision pass for now if having it means possibly losing my home.
I think there's two ways at looking at this, and while it's probably easy to say seeing as its your only asset then it's unwise to use it, if your willing to take the risk and know your business will work, then it could be a risk worth taking. If there's no other way to get your business up and running, then it could be your only option to make a better life for yourself.
I think it would be quite risky. If the business should fail and almost all do within the first five years, and you default on the loan your home could be taken. It is not a smart thing to do in my opinion. There are lots of governent loans for small business start ups. Look into that kind of thing before you put your house up for collateral.
When I put up my first business venture of a boutique for retailing of ready-to-wear clothing items, I was thinking of making it big time like getting a shop in a commercial area of in a mall. And my recourse was to get a mortgage on the property of my older sister. But my husband didn't agree because mortgaging a property or borrowing money for a start up is not a good idea. What happens when the business fails? Everything would be lost and there's no way to recover. For a business, it is a good advice to have capital in your pocket otherwise don't ever start a business.
If this is how you feel then you should probably not go ahead with your plan. Sounds like it's not what you really want. What you could do is start putting X amount of money on the side each month, and doing things like renting a room in AirBNB etc and save all of that money too. The more cash you have, the easier it is to negotiate loans as you have solid proof that you are capable of saving money, using it wisely and it also shows that you are putting your own money into the company, not just the banks money. Don't give up on your dream, now might not be the time but you can start today in order to accomplish this later on in your life.
Wow! Thank you so much for your beautiful words of advice. I don't want to become emotional and all but this really means a lot to me. You know I'm in a stage of my life where it's hard to figure out which way to go and what step to do next because there are just too many ideas in my mind that don't seem to be coming out well. I have the dream, I have the ideas but I lack the budget and at this stage of my life put together with the hard economic times, it seems like my only option right now is investment and starting a small business. I'm not sure if I'm making any sense out of what I'm saying but yeah, this is pretty much how jumbled my ideas right now are.