Housing's New Victim: Small Business
The lingering real estate woes are cutting off a key source of funding for entrepreneurs.
The stagnant housing market has a new set of victims.
If you’re an entrepreneur, you may have learned this the hard way already. With home values depressed and banks tightening lending, home equity loans are drying up as a key source of funding for small business owners, the Wall Street Journal reports.
In 2006 small business owners took about $75 billion from their homes to put toward their businesses. That number has now fallen to about $20 billion, reports the Journal, which also says the total isn’t likely to increase during 2012.
Many entrepreneurs have come to depend upon home-equity borrowing to help finance the early stages of their business’s growth and development. In fact, about one out of three small-business owners has borrowed against the equity in his or her home, or used the home as collateral for a loan to finance the business, according to a 2009 Gallup survey cited by the Journal.
Most entrepreneurs don’t have substantial enough cash flow to get traditional business loans, the Journal notes, with 64 percent of start-ups getting turned down when seeking loans from banks. —Caitlin Berens
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