Using House to raise finance

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Easigoin

Guest
I am running a small business at present with an overdraft of E20,000.
Always seem to stay around the limit.
My main expense is my wages. Without this the company could soon be back in credit within a few months. What I would like to do is get, say E50000 from the value of my house, keep this to live on and let the company operate without this overhead. This would give my about a year to sort out all my problems. I dont want a loan as this would defeat the whole purpose. I own my house. How can this be done?
Any suggestions??
 
Do you mean that your home is mortgage free? If so then you might be able to do an equity release to raise finance but (a) lenders would look at your capacity to service the loan and if you are effectively borrowing to pay yourself they probably won't like that and (b) doing this means that you are putting your home at risk should your business fail. If you are always running a €20K overdraft perhaps the business is not viable?
 
Yes my house is mortgage free. The house is worth around 600,000 E. I felt releasing 50K would not be a problem. Business is not viable at present hence trying to sort out finance. Would you have any suggestions?
 
Easigoin said:
I felt releasing 50K would not be a problem.
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But - as I said above - would you not be effectively borrowing this money to pay yourself a wage from a struggling business in which case the lender will presumably be wary of advancing a loan on that basis? And you would be putting your home at risk of your business failing which, from what you have posted so far, sounds like a realistic possibility.
 
Easigoin said:
...What I would like to do is get, say E50000 from the value of my house, keep this to live on and let the company operate without this overhead. This would give my about a year to sort out all my problems. I dont want a loan as this would defeat the whole purpose. ...
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Maybe I missing something, but is this not a loan?
 
aircobra19 said:
Maybe I missing something, but is this not a loan?
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it is a loan to the business so it doesn't have to pay the salary, but not directly loaned to the business.
But it might be a better way to do it as it would remove the need to pay tax and prsi on the money from the company.

Will the money you save on paying the salary be used to develop the business and make it viable, rather than just a cashflow exercise that will have you back in the same situation within a year.
 
Yes. This was my thinking.
The company is in the process of being developed. I felt that if I had 6/9 months without the wages overhead this would give me "breathing" space.
The equity release scheme is only suitable for people over 60. So we are really only looking at a loan.
Using 50K to clear up overdraft and even some repayments will give me what I'm looking for - Time !
 
I guess it would depend on how realistic, is it, that the company will return to profit. If it doesn't you'd be digging a much deeper hole. I guess you could always sell the house if needs be down the road. Though it could be a firesale in the current market.
 
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