Coming up with an idea for a business is very easy. Likewise, starting a business is also relatively easy. However, any entrepreneur or business person will readily tell you that one of the hardest things to do in the business world is to grow or scale a business. While a lot has changed in the business world and there are now several resources available to any business person that can make running a business a lot easier, especially the advent of the internet, the one fact that has remained true or constant is the difficulty with which it can take to grow a business, especially when it comes to growing the company’s revenue or profits.
Quite arguably, out of every one hundred entrepreneurs or business people who get asked what the number one resource is that they need to help them grow their business, more often than not, the vast majority of them will say they need money. Which is exactly why many business people often turn to the extreme measure of taking a loan from the bank while using their home as a collateral. This is of course after they must have exhausted all other avenues to secure financing such as finding an investor, raising money from family and friends, and all other such means.
The people who often do this are those who have strong, and perhaps even unrealistic belief that if only they could just get their hands on a certain amount of money, then they would be in a position to grow their business to the point where it would start to generate bucket loads of money and they would become super rich. It could also be people who have invested so much time and energy into the business that they cannot foresee themselves closing the business and cling to the hope that if they could just lay their hands on some money and execute a certain project or strategy, then things would turn around.
For those people who then proceed to collateralize their home to finance their business, the question then remains, is a good idea? The short answer is, No!
The longer answer and rationale against such a move would involve questions such as: what happens if the business fail despite all your efforts and money invested? If you have dependents, what would happen to them if something were to happen to you that left you incapacitated or even worse? And a whole list of other unfavorable situations that could arise.
One of the worst things that can happen to an individual is for them to become homeless. More so if this happens to the individual with a family to provide and take care of. Which is exactly the situation that a business persons opens or exposes him or herself up to by taking the risk of mortgaging his or her home to finance a business that may or may not be successful.
However, if on the off-chance that you are dead set on going ahead with the plan and nothing is going to sway you away from your decision, then perhaps what you need to do is to try and guard yourself and mitigate some of the risks you will be exposing yourself to.
Perhaps the very first of these things that you should do is to seek the counsel of a small business attorney in NYC for example. This is because you want to have someone who is external to the business and doesn’t have a direct stake in it and possibly blinded by their direct involvement in the business. Basically, you need a fresh and unbiased set of eyes to look over your business and give his honest opinion on if you are headed in the right direction. Secondly, you need to be sure that you have a trained and experienced professional lawyer look over any contract you will be signing with the bank before you take ownership of the funds.
If for whatever reason you are unable to secure the services of a small business lawyer, then you should at the very least be sure to speak to a contract attorney before signing any contract with the bank.