Is it possible to fund your business by selling your home? What are the basic requirements and challenges you are likely going to face when you want to sell your real estate property and use the money to finance your business?
When starting a new business in the UK, securing enough capital from external sources such as banks and other investors can be an uphill task. Most entrepreneurs, therefore, avoid external financing and enjoy the independence that comes with self-financing. Selling your house can provide you with the much-needed funds to run your business.
Here is everything you need to know about selling your home to fund your business:
1. You Get Full Ownership When You Fund Your Business By Yourself
Financing your business through external sources is sometimes equivalent to surrendering some of the benefits, either currently or later. Sharing the profits will reduce your stake in the business. If you take any of these types of business loans (like personal or business loans, SBA loans, etc), you will have to spend some of the profits repaying the loan and the interest.
Funding your business by selling your home will ensure you retain full ownership and get all the returns yourself. Besides, given that you understand your business’s vision clearly, it makes sense to operate without other financial stakeholders’ interference.
2. You Get Total Control of Your Business
When you sell your property to finance your business, you do not pay the price of accepting money from outside. You will not bother yourself with trying to impress investors. Property purchasing companies won’t be on your neck to appease investors.
Raising capital through venture capital or private equity funds may lead to loss of full control of your day-to-day business activities. Besides, your financial partners may introduce new ideas that could be different from what you envisioned for your business.
Selling your house can provide you with enough capital and ensure you concentrate on growing your business without worrying about investors withdrawing their support.
3. Selling Your Home to Fund Your Business Could Be Your Only Option
Financing a new business using external players can be challenging, sometimes forcing you to sell your house. Many banks do not extend loans to new businesses. Venture capitalists are sometimes reluctant, especially when they have little knowledge and trust in your business ideas. Your family and friends may be unable to provide you with enough financial support to start or expand your business.
Selling your home will give you enough capital to start your business when all the other sources fail. When your business succeeds and makes a good profit, you can purchase a new home in the future.
4. Ensure Your Business Idea is Worth the Risk Before Selling Your Home
Selling your home to fund a start-up is a significant risk. Sometimes the business may fail, and that will be a big blow to your financial situation. It would be best if you came up with a brilliant business goal that is worth the risk of selling your home. If the idea has a little chance of succeeding, you may decide to put off selling your house.
Before you decide to sell your house to a cash buying company, ask yourself if it is okay to sell that piece of property you acquired in the past to fund your new business. Is it really worth it? Be honest with yourself. If you think that your business plan isn’t worth it, you may need to consult a professional.
Challenges When Selling Your Home to Fund Your Business
Although putting your home on sale can be a reliable and secure way of funding your business, the process is not as straightforward as it seems. Some of these challenges may cause a delay in funding, leading to missed opportunities. Some of the disadvantages of financing your business by selling your home are:
1. It is a Time-Consuming Process
Your home is not something that you can quickly sell within a day or two. It would be best to determine your property’s value by comparing it with the others within that location, which may take some time. When selling your home online, you also need to share photos of your house. As if that is not enough, you have to invite numerous prospective buyers to your property for inspection before the purchase. Besides, if you choose to sell through property agents it could take several months.
2. It Could Be an Expensive Process
It is hard to sell your house alone without involving estate agents. Although these agents may help you to get a buyer fast, they are also expensive. You have to give a certain percentage of the final purchase price to the agent as their commission. Consequently, the amount you expected to raise to fund your business by selling your home may decrease significantly based on the percentage that you pay the agent.
Selling your home to fund a start-up is an excellent idea. Selling through a property agent or an online portal may take time and delay your business’s inception.