Business Equity Loans

Business equity loans can provide a good financing tool for a business in need of funding and cash.  It works similar to a home equity loan, but your dealing with company assets as the collateral instead of personal assets.  The business is able to borrow funds against the property value that the company owns.

How is it structured?

Business equity loans are mortgages placed on a business's property in exchange for the funding. The equity (total fully owned value) of a business can be a good source of financing for a seasoned company in need of cash. Business equity loans are typically set up using a Loan to Value (LTV) ratio.

Example of Business Equity Loan:

A business that has a property value of $400,000 could take out a loan at 80 percent Loan to Value, which would provide the company with $320,000 in loan proceeds. The lender places a lien on the property to secure the transaction and repayment of the loan. Some lenders offer interest only payments for a set period of time, but this can cause higher overall interest cost on the loan and business owners really need to focus on getting the principal balance paid down to reduce the cost of funding.

Things to Consider

In most cases, the company has the option to make principal payments all times during the loan repayment period. Careful study of all the loan terms is recommended as many lenders include early payment penalties as they want to make a certain amount of money on the loan regardless of the payment period. This could make early repayment more costly so it’s important to know the rules and penalties up front before committing to any business equity loan. As with all business financing it’s very important to ask lots of questions up front so you are not dealt any surprises later on.

Businessfinanceapp.com offers several business equity loan options from lenders across the country.  If you would like to evaluate some lenders and receive up to 5 free quotes for the business equity loan, simply use the loan quote form on the right side of this page.

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