We are a commune of inquiring, skeptical, politically centrist, capitalist, anglophile, traditionalist New England Yankee humans, humanoids, and animals with many interests beyond and above politics. Each of us has had a high-school education (or GED), but all had ADD so didn't pay attention very well, especially the dogs. Each one of us does "try my best to be just like I am," and none of us enjoys working for others, including for Maggie, from whom we receive neither a nickel nor a dime. Freedom from nags, cranks, government, do-gooders, control-freaks and idiots is all that we ask for.
Given the evidence that small business owners use home equity as a source of financing for their businesses, one would expect the recent decline in home prices to have adversely affected small business borrowing.
I wonder how many small business owners have maxed out, or over-maxed, their equity credit lines. I know one small contractor who has.
I haven't had to tap my home owner's equity yet but I have had one bank cancel my L.O.C. even though I have never missed a payment. My other bank's L.O.C. is still active and I have run that up a bit. It is amazing what having a dead beat creditor will do to cash flow....
I, as I'm sure I've said before, got wiped out with the Lehman bankruptcy and its aftermath. I suffered a good deal personally, but I did have the corporate veil to keep it from coming into the homestead. I have been having conversations with other current business owners wanting to learn about how I managed my situation. I am shocked to learn the number of them that are sole proprietors. There is no protection for them.
Hiring a good attorney is expensive, but that up front expense, along with his expertise in other transaction (lease negotiation) has allowed me to keep the roof over the head of my family.
I had a good attorney. Even won a sizeable judgment. Will I ever collect? That is the question. The deadbeat embezzled several million dollars form the company that owes me money, but the Florida Attorney General is not interested in pursuing small potato crimes. He wants to go after bigger fish.
This leaves me owing $$$ on credit cards, money to the attorney, and possibly nothing to collect. The individual who stole the money, so far, looks to have gotten away with it. Who says crime doesn't pay? If you or I stole a candy bar from the 7-11 we'd go to jail for 5 years, but for "white collar" crime, no one is interested.
So I have learned, if you are going to commit a crime, do it white collar and steal millions, chances are you'll walk. But use a scary water pistol to lift $20 from the till, and do 15 to life.
Many small business owners do use their homes and personal assets to fund their business. They are forced to in some cases because the Ma and Pa local banks have been gobled up by commercial banks, that laugh at small business owners who apply for a business loan. Gone are the days the bank manager actually knows you.
Another problem, that is off point, is many suppliers are forcing business owners to issue "Personal" gurantees bypassing protections of S corporations and LLC's.
And yes dead beat payers can reek havoc on a under funded business.
Around here, you have to use your house as collateral for an SBA guaranteed business loan. They take your house before the SBA guarantee. It happened to a client of mine. He had to cash out his 401K before he could get the loan. So, he ended up with no retirement savings, no house and 2 kids. It was very sad.