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Non-traditional methods for financing your business

brokenpiggy19109501.jpgMost potential business owners know about going to a bank to obtain financing, but this is not possible for all business owners because of credit issues. Obtaining financing through a bank is a traditional method of obtaining business financing, in some cases you might need to use some non-traditional methods of financing to get your business off the ground. Here is a look at some of the more popular non-traditional methods that you can use to finance your business.

Number one: Second mortgages
Taking out a second mortgage on your home is a drastic method and should be avoided at all costs. The reason that this method should be avoided if possible is because of how dangerous it can be for you personally. If your business does not succeed and you took out a second mortgage to finance your business, you can end up losing your house. The reason that you can end up losing your house is that even if the business fails you are still going to be responsible for making the mortgage payment each month; it will not go away just because your business has. Taking out a second mortgage for financing a business is also considered an advantage over regular loans because the interest that you are paying on the second mortgage is considered tax deductible, not to mention that the interest rate is usually lower than the rates charged by credit card companies or unsecured loans. Getting a second mortgage to finance your business is great if you want to borrow a lot of money at one time and have a fixed monthly payment.

Number two: Life insurance
Another option that you have is borrowing against the cash value of your life insurance policy. This method of obtaining financing can only be done if you have a whole life insurance policy; borrowing against the value of a term life insurance policy is not allowed. If you choose to borrow against the cash value of the life insurance policy, you will only want to do so if you have had the policy in place for several years, so that you have some cash value built up. When borrowing against the cash value of the policy most insurers will allow you to borrow up to ninety percent of the policy's value. The one thing you need to be aware of is that you need to keep current on your payment obligations so that your policy remains intact. If your policy is cancelled for any reason you will be required to pay back the amount you borrowed in one lump sum.

Number three: Selling personal assets
If you have any personal assets that are of value or even old business assets, that you no longer need you can consider selling those assets to finance your business needs. The one thing that you want to watch out for when selling assets is that you are not selling something that you will need. If you will need the item later on for business or personal use, it is better to keep the item rather than sell it because you will have to pay more money later on to replace the item that you sold. For example, if you are an independent freelancer you will not want to sell your main computer, you can sell any extras that you have sitting around the house that you are not using though. When selling any item you want to make sure that the price you are selling the item for is going to be enough to get you through a tough spot, if it isn't going to be enough you should look at other means of financing. For example, if you sell your boat and the money you receive is only enough to get your business through two weeks you can look elsewhere for the money you need to get started.

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