trystwiththemoon started this topic @ 11:24 on 24/10/2005
Hi - forgive what is probably a very naive question but I'm just dipping my toe in the water for the first time!
I've been thinking about starting a cafe for a long time now and the time has come to do something about it. I will see a financial advisor shortly but wonder if someone can help in the meantime.
I have negligible savings to invest in the project so would be looking to raise money from the bank. I have a relatively small mortgage but a large amount of equity on my house and I'm wondering if there is a way I can release a small amount of that equity to invest in the business, without signing my house away? One option would be to remortage I suppose but given I expect to to hard pushed for money in the first year, I don't really want to increase my mortgage payments too much. The term 'releasing equity' comes to mind but I don't really know the implications of that.
Many thanks!
RE: Basic question about raising finance
James Smith | 24/10/2005 02:10 PM
The good news is that if you have equity in your property, then yes you could certainly fund your project using this.
The bad news is that you would be personally liable for its repayment, whatever happens to the business. I.e. if debt is secure on your property, failure to make interest payments would mean you could lose your home.
As you have noted in the first year of business affording the repayments could well be an issue although the repayments are likely to be a lot less than on a commercial mortgage.
There are no easy answers, but as with any new business that requires capital, you will end up taking considerable personal financial risk.
Regards,
------------------------
James Smith
Chartered Accountant
www.jamesesmith.co.uk
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Your indispensable guide to Small Business Bookkeeping, Self-Assessment & VAT
RE: RE: Basic question about raising finance
trystwiththemoon | 24/10/2005 02:34 PM
Thanks for taking the trouble to answer this 
I guess it will come down to whether or not I'm brave enough to make the leap from being secure and bored or knee deep in risk (not to mention debt) but challenged!
Thanks again