Six Ways Under Your Nose To Finance Your Home-Based Business
There are lots of ways to get additional capital to expand a home-based business. But before you look outside for financing, leaving the decision about your company's progress and merits to someone else, consider these six ways under your nose to finance your home-based business:Personal Savings Savings are easy to tap and involve no paperwork. The negatives: if you use the money in your business, it eats into your safety reserve and is no longer there for emergencies. It diverts funds from a very low risk investment to a high one. Whole-Life InsuranceWhole life policies accumulate tax-deferred cash value that you can tap for your business.
But the only way you can tap this cash without paying taxes is to borrow against your policy. As long as you keep your policy intact and pay premiums when due, loans remain tax-free.The negatives: you will be converting a low risk investment into a high one; if you decide to terminate your policy or if you default on repaying your loan, taxes will be due on all cash value accumulated under the policy; if you die before your loan is repaid, any distributions to your beneficiaries will be reduced by the amount of your outstanding loan.A Loan from Your 401-K PlanYou can borrow up to $ 50,000 of the money you have saved under many 401-K plans. There are no credit checks. Interest is usually a percentage point or two above the prime rate and the interest that you pay back to the plan will be tax-deferred to the plan. Most loans are repayable out of salary deductions over five years.
The negatives: you will have less money invested toward retirement; the dollars used to repay the loan will be after-tax dollars withheld from your paycheck; if you fail to repay the loan, the IRS considers your failure a premature distribution -- you will be charged taxes on the borrowed amount plus you may be assessed a 10% early-withdrawal penalty.A Home-Equity LoanThese loans do require that you apply and be reasonably credit worthy. You generally can borrow up to 80% or 90% of the equity value of your home. Interest on these loans is generally tax-deductible.The negatives: you will reduce the equity value of your home by the loan amount; you will be diverting funds from a relatively safe investment to a high risk one; if you default, you put your house at risk of foreclosure. Think very carefully before using this form of financing.Personal Credit Lines and Credit CardsThey are convenient, versatile forms of financing. You can borrow and re-borrow up to the line limit as needed.
The negatives: you will pay relatively high interest rates-- rates range from 12% to over 18%; the minimum monthly payment on many of these arrangements will repay the outstanding balance within 42 months; it is easy to dig yourself deep into debt using credit lines and credit card debt; high outstanding balances against your line can negatively impact your personal credit rating. A Margin LoanYou can use margin loans for purposes other than buying additional securities. Any margin loan will be secured by your equity shares. Rates are often below prime, applying is relatively easy, and these loans have very flexible repayment terms.Loans are initially limited to 50% of the purchase price of your equity securities. Loan repayments are triggered when the value of your stock falls below the margin limit.The negatives: Because borrowings are predicated on volatile stock values, a margin loan can be a risky proposition; if you default in repaying, the brokerage firm can sell your securities to satisfy the loan; an untimely sell-off can have a devastating effect on your portfolio and negative tax consequences.
The only safe way to consider a margin loan to finance your home-based business is to limit advances to a relative low ratio of your stock portfolio value ? say, 25% or less. Most of these financing methods are under your control and don't require business plans or company financials to qualify. Although each of these methods has risks and disadvantages, so do most external methods of financing. Before proceeding with one of these financing methods, carefully consider the potential benefits, risks and consequences. Whatever you decide, it helps to know the options right under your nose..
George Parker is a Director and Executive Vice President of Leasing Technologies International, Inc. (?LTI?). Headquartered in Wilton, CT, LTI is a leasing firm specializing nationally in equipment financing programs for emerging growth and later-stage, venture capital backed companies. More information about LTI is available at: www.ltileasing.com.Home Improvements Turn Average Homes into Dreams Come True
If you're thinking about taking out a home improvement loan, there are several options to consider. First and foremost, your mortgage consultant needs to know why you want a home improvement loan. Here are some factors to take into consideration.?How long have you been in the home??Will the improvements increase the property value? ?Are you making improvements to increase energy efficiency??Will improvements be made in one fell swoop, or in stages??What is the current outstanding balance on your mortgage??What is the appraised value of the home??How much will the improvements cost??What improvements will be tax deductible??Do you have other revolving debt that you would like to pay off at the same time??Are you making improvements because you plan to sell the property?The New Tract Home BluesBuyers of newly-built homes are often tapped out after making the initial down payment and closing costs, including upgrades to amenities and the inevitable need for new furniture. Shortly thereafter,...
Home Improvements Turn Average Homes into Dreams Come True
Tax help > Home Improvements Turn Average Homes into Dreams Come True
I'm being audited by the IRS-Now what?
How does the IRS decide who gets audited? The IRS uses a recently updated formula and scoring system to evaluate tax returns. If something seems out of whack- -like low income accompanied by extremely generous charitable contributions--the return is flagged for a more in-depth look. Simple math errors do not warrant audits. What does warrant an audit are things like taxpayers forgetting to report a source of income or getting paid as independent contractors and forgetting to pay your Social Security tax. There are two basic types of audits.
The most common are by correspondence. The IRS may request further documentation by mail. You should send copies only and always keep original records in your files for at least three years, the amount of time the IRS can go back and audit a return. Keep in mind, the IRS may go back indefinitely if they suspect fraud. The second type of audit is face-to-face.
These occur when the amount of documentation requested by the IRS might be...
I'm being audited by the IRS-Now what?
Tax help > I'm being audited by the IRS-Now what?
Clouds on the Horizon: Property Title Issues Which Affect Sale
When buying or selling a home, proof of ownership, or the property title, and issues affecting it, are critical. If you have a cloud or lien on your title, this means somebody or some business entity has laid claim to a portion of the equity in your home. There are different types of liens that affect the marketability of your home. For this article, I interviewed Chris Swynford, an attorney in Williamsburg, Virginia, whom I utilize frequently for real estate transactions. Mr.
Swynford commented on several types of property liens that are common issues for homebuyers and home sellers. Property Title Insurance ? for Matters NOT of RecordIn order to understand the different types of liens, it is necessary to review the concept of the actual deed or title. A property title can be insured by a title company, and I always recommend my clients purchase owner's title insurance coverage, even though not required by commercial lenders (which ALWAYS require lender's carry title insurance)....
Clouds on the Horizon: Property Title Issues Which Affect Sale
Tax help > Clouds on the Horizon: Property Title Issues Which Affect Sale
Tax Certificate Investors Make More Money If They Know "The Basics" of Property Descriptions!
Tax Certificate Investors Make More Money If They Know
"The Basics" of Property Descriptions!
There are 3 basic systems of describing real property. They range from the time the USA was founded? up to the stream-lined present day systems. Knowing them will let you into the "exclusive code" of the tax assessors and collectors. They set the rules for ALL Tax Certificate and Deed auctions.
In colonial days they used obvious physical features (hills, rocks, rivers, forest, etc.) and a system called "Metes and Bounds". Just the Metes and Bounds System (A description of land by property lines ? with terminal points and angles) is still used by all states at present.
"Metes and Bounds" requires extensive study and serious knowledge of land and geography.
At present, the "Block and Land" system is preferred and very easy to understand! The major plot of land is simply divided into smaller lots and blocks that show the streets with their individual...
Tax help > Tax Certificate Investors Make More Money If They Know "The Basics" of Property Descriptions!
Tax Benefits of A ?C? Corporation - Funding
If you are going to form a corporation, you might be surprised to learn a "C" corporation comes with a lot of tax benefits. While this article isn't intended to replace the advice of a good tax professional, it may serve to open your eyes to the value of a "C" corporation."C" CorporationThe "C" in C corporation has a few legal ramifications, but it is primary a designation for tax purposes. Put in layman's terms, the designation simply means the corporation will act as its own tax entity. In contrast, an "S" corporation acts as a pass through tax entity, pushing its financials down to the shareholder who report the information on their personal tax returns.The Internet Revenue Code sets out the law on tax and it contains a few juicy provisions for corporations. Lets take a look at one of the advantages.
IncorporatingWhen a party transfers something of value to another party, the IRS gets interested. It views the receipt of something of value as a taxable event. In simply terms,...
Tax Benefits of A ?C? Corporation - Funding
Tax help > Tax Benefits of A ?C? Corporation - Funding