Many business owners are unaware of the inherent benefits of releasing equity to fund their business activities. Equity release options such as lifetime mortgages are now responsible all for almost a third of all new mortgages, especially among new homeowners. whether you qualify to release equity or you are still contemplating if you qualify or not, knowing the benefits and importance of Equity Release on a business can help you make more informed choices. Lifetime mortgage remains the most popular type of equity release with lots of benefits;
Equity Release Helps Raise Capital for Startup or Business Acquisition
Whether you are starting a new business or acquiring an existing one, Equity Release is one of the quickest ways to raise capital for such funding. If you have much of your wealth tied up to a property or real estate, you can simply unlock some of this money tied up to the property to raise capital. You are only unlocking some of the price value of your property, hence you don’t have to sell or lose the property while repaying the loan plus interests. Think about the numerous paper works and waiting time you will face when applying for traditional bank loans, you will see how easy and convenient it is to raise capital funding for your business venture through Equity Release.
Expand Your Business and Create More Opportunities
Another avenue through which Equity Release can help your business is to provide enough capital to expand your existing business. If you have low retirement income from your savings account and pension, or you have personal debts that you are still paying, you may want to free up some cash through Equity Release to raise funds to expand your business. This means you can purchase new equipment, hire more employees and increase the output of your products to increase your long-term profit. Investing your Equity Release funds in a profitable business will even make it easier to repay your loans quicker.
Repay Current Business Loans
If your business runs into a temporary problem, getting an equity Release may be the quickest way to get out of such debt and avoid business collapse. Business debts can be unpredictable, it could come from your suppliers, vendors, and even a natural disaster, but when you have a property that you can free up some cash from through Equity Release, you will be able to repay the debt and even possess extra cash for other purposes. This will ensure that you do not sell the business off.
Borrow in Bits or Lump Sum
One of the many benefits of getting Equity Release is that you can take the loan in bits or as a Lump sum. As a matter of fact, financial experts advise that you should take Equity Release in bits, which means you only borrow a little at a time until you need another loan for another purpose. Borrowing in bits has numerous advantages, for instance, you can repay the debt within a shorter period, and it carries lower interest rates. This is different from a Lump sum borrowing that will take a longer time to repay the capital and interest rates.
You need to keep in mind that some Equity release provider may impose a minimum borrowing limit which could be between £10,000 and £ 15000. It is also important to note that not all equity release service providers will approve subsequent applications, hence you must do a little research before you make a final decision on where to take up an equity release.
You Can Remain on Your Property for Life
Whether the property from which you release equity is a residential or commercial one, you have the right to remain in it while you borrow the loan for business purposes. In the UK you may not be able to borrow more than 50% of the total value of your property, in Equity Release, which means you shouldn’t worry about losing your property. Even if you fail to repay the debt, the property may be sold and the equity release value will be deducted and you will get the remaining larger share. The risks involved in the release of equity is much lower when compared to the risks attached to some other types of loans.
Make Payments for Inventories and Staff Salaries
If your business is short of cash and you need to stock up new supplies or pay staff salaries, you may want to consider taking an Equity Release as a short-term loan to clean these payments. Depending on the amount of cash needed, you may release a very small Equity from your property to meet up with these challenges and you can repay such loans as quickly as you can.
Conclusion
Equity Release comes with several benefits but it is important to understand the requirements before you apply for one. In the UK for instance, you must have attained the age of 55 to release equity. In most cases, older people who have retired or near retirement often use equity release to take up new borrowings. Secondly, your property must be located in the UK to qualify for the release of equity. The minimum property value a lender will accept to offer an Equity Release loan is £75,000. There is no upper limit to property valuation when it comes to equity release.
It is important to note that lenders will take the condition of your property very seriously, hence they expect your property to remain in good condition and well-maintained to qualify for the loan. Some insurance companies who offer Equity release may only consider properties with values higher than £ 1,000,000. You may want to consider some home improvements or renovation and even remover of clutter from your home before considering this type of loan, even if you are considering taking the loan from individuals. It is often possible for a lender to reduce the lending criteria when you meet some other requirements such as a great credit score.