Using Your Home As Collateral

[selfemployed]

I am a firm believer that any new business venture should be able to stand on its own two feet but many financial institutions will demand a personal guarantee for seed funding. Would you use your home as collateral for a new business venture?

 

[Businessman]

NO! - Elsewhere I recounted the cautionary tale about a rogue builder who, back in 1988, stiffed me for (IIRC) £1500. another side to that tale is that the same firm stiffed the PR company for circa £75K, which was run by a guy in his early 50s together with his slightly older wife. - Cut a long story short, they'd tooled up with all sorts of printing kit which they then couldn't pay for. What's more they'd signed various personal guarantees including securities on their house etc. - Cost them EVERYTHING! 40 years of work down the tubes! - and when I say EVERYTHING I mean it even cost the woman her marbles! She had a total breakdown, they were DONE!

Seeing that put me off finance for life... Everything I have is bought cash; I don't lease anything, don't run overdrafts; nothing! - Back in '08 I saw a number of colleagues fall because they owned nothing; and when they couldn't meet their leases lost the tools of their trade. - Not 'quite' as bad as losing the roof over your head; but then, when you can't work that's next on the list!

 

[Needhelp]

Funding your business in the early days is always the difficult part, there will be a period when income is low and you may need to fund your own lifestyle. I know many people who have blurred the lines between full-time employment and working for themselves. They built up their self-employment operations in their own time, living off their full-time employment income, and then when the time was right they simply switched full-time to self-employment. This softly softly approach has worked for many people but it can take time. However, perhaps the main attraction is the limited financial downside.