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Learn about the Personal Finance that Will Pump in Fresh Blood to Your Business Venture

By Charles Hopkins Published 09/19/2006 | Finance

Are You a Budding Entrepreneur? Learn about the Personal Finance that Will Pump in Fresh Blood to Your Business Venture

Small businesses require the supply of oxygen from time to time. This oxygen is provided in the shape of financial backing which in economic terms, is known as capital. There are several ways of raising this capital to pump some fresh blood into your pet venture. You can increase the assert value of your business by finding financer's to invest money in the business, buying things on credit, holding some payments, by borrowing money, and by making revenues. When you are borrowing money for your business, you are entering into debts. On the other hand the profit you are making will be reinstated in your business.

But there are two other tricky ways to boost up your business and that is by using personal and home loans. If you are an entrepreneur with a home of your own, this is the time you can make use of your home to add capital to your business. Like many other small entrepreneurs, you can also take the advantage of home equity loans to advance your business a little ahead.

So far as the home equity loans are concerned they, like other types of loan, are not free of risk factors. But they come with an added risk of losing your home too in case you default on paying up the interest. In addition to that you have to pay upfront fees, closing costs or annual fees. In case of those loans, where you have to make a balloon payment at the end, you may be required to borrow more money to meet with that expense.

But all said and done, taking a loan against home equity has become one of the most popular tools for raising capital for the small business owners. To keep with the growing demand, many lending companies have innovated a variety of ways of providing home equity credit lines. Here are a few reasons, why you should consider taking a home equity loan to boost up your business in spite of the risks associated with it.

The home equity loan comes with a low interest rate. On the other hand you get a relatively large loan amount depending on the value of your loan. Moreover you are entitled to tax advantages on interest payments.

If you are discouraged by the risk factors associated with home equity loans, you can consider a second mortgage installment loan. As opposed to a home equity loan, second mortgage loans are credited on a lump sum basis. These lines of credit require an additional mortgage on your home. You are generally charged with fixed interest rates and fixed payment amounts in second mortgage loans.

If you do not want to put your home at stake, you can avail the facilities of several credit lines that allow you to withdraw funds as needed to meet with certain business expenses. But there is an upper hand to borrowing money through these lines of credit. The interest rates charged by these lines of credits are much lower than credit cards but somewhat higher than bank loans. Credit lines in the form of bank loans are however not available for the enterprises other than the profitable, and well established businesses.

You can also consider borrowing money for your business against your 401(k) plan or stocks. It allows you to borrow up to a 50,000, but the amount is not to exceed 50 percent of the balance in your 401(k) account.