The ripple effect of the mortgage liquidity crisis may be felt by small businesses in San Diego. This Denver Post article suggests that Home Equity Lines of Credit (HELOC) are a major source of small business capital. A quote from a concerned Denver business owner:
"I used to have no problem any time I wanted to refinance. It was a two-day process," said Brett Carter, a small-business owner in Jefferson County who has tried unsuccessfully since March to refinance his home mortgage.
Many small businesspeople can not qualify for traditional business loans or choose to avoid the high interest charged by San Diego Banks for SBA loans. They turned to HELOCs as a source of business lines of credit because of the easy qualification and relatively low interest rates. The challenge is that many business owners can't document income. They have cash flow to service the debt, but can't show the cash flow under traditional lending guidelines.
Our main source for HELOCs did cut back a bit but still offers stated income loans for business owners. Our advice to San Diego small business owners is to establish a HELOC while the money is available. It is our opinion that HELOCs may very well be the next loan product to be restricted. Falling home values and higher equity requirements for HELOCs could very well restrict a San Diego small business owners access to capital.
Today, a HELOC is simple to establish, has very low costs, and you only pay interest on the money you use. Tomorrow, who knows?
READ these related articles:
San Diego Mortgage Rates Report: August 3, 2007- Trouble or Opportunity?
Foreclosure ? Leveraged Homes Are Last.
MULTI FAMILY LOANS: 2nd Mortgages
