Dropping Home Values Crunch Credit Lines
Many small-business owners fund their business with a home equity line of credit (HELOC), like Marcia and Tom Blackwell did when they launched their business, Blackwell's Organic Gelato, in 2005. It seemed like a no-brainer: The interest rate was much lower than a traditional business loan, and they liked that the money was available quickly. But last fall, the company was close to becoming profitable when Marcia's bank froze her HELOC at $190,000 – although she had not missed any payments. The reason? Her house had lost value.
Like the Blackwells, countless small-business owners were using home equity lines that have since been frozen. For businesses that are already struggling, the results can be devastating.
Source: CNNMoney.com | July 8, 2009