Portrait of a young man standing in front of his coffee shop. Young man with beard wearing an apron standing with her arms crossed and looking away.

Our street is adjacent to a golf course. As kids, my brother and I would go down and pick up golf balls that had escaped the fence, clean them up and sell them back to passing golfers.

We were able to make $5 to $10 this way on a good day, but if your entrepreneurial ambitions extend beyond being able to pay for ice cream from the ice cream truck, you’ll need significantly more cash to get your business up and running.

Where can you get that cash? Traditional small business loans can be hard to get as a startup since you have to show cash flow and balance sheets, among other documentation. One great option might be to take cash out of your home, especially as long as rates remain low.

Consider a Cash-Out Refinance

If you’re looking to start a small business of your own right now, a cash-out refinance might look particularly attractive, especially with current interest rates. As of this writing, a 30-year conventional mortgage is in the high 3% range, with the 15-year term being 0.5% lower.

Compare this to current rates for long-term small business loans through the Small Business Administration, and you’ll find that business loans have much higher rates.

A cash-out refi might be particularly effective if you’re looking to start a side gig. Maybe you’re an accountant by day but want to turn that sweet tooth you’ve always had toward more constructive pursuits with a small homemade ice cream business that you can work on at night.

Something like this could work out well because you can use the income and security of your current job to get a loan to pursue your passion.

On the other hand, maybe your business has already gone from passion project to the legitimate source of your livelihood, and your strawberry ice cream is considered the best in the city. You’ve been making and selling it out of your house for a while but finally feel it’s time to make the leap to a retail location.

As a self-employed business owner, you can consider taking cash out of your house as well. In order to get approved, you just need to make sure your lender can see the appropriate documentation. This varies depending on the type of loan you’re trying to get but typically includes these items:

  • Two years of business and personal tax returns
  • Year-to-date profit and loss statements
  • Balance sheets
  • Some form of verification of your self-employment

You may be able to get a loan for a home after a single year of self-employment, but additional documentation is required.

Research Other Options

If you don’t want to touch your home equity, RapidAdvance offers short-term small business loans that may allow you to expand your business or handle day-to-day operations. If you just need a smaller amount of funding to get your business off the ground, look into a personal loan from a company like RocketLoans. A personal loan could be a great solution for businesses that are just starting because it relies on your personal financial situation rather than business cash flow that you don’t have yet.

Every business is different. Take your time and pick the financing option that makes the most sense for you.

If you’re looking to use your home equity to start or grow your business, take the first step toward making those dreams a reality by applying online today.

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