Thread: Financial Question!

anyone?

I would say yes.

IMO, a home equity line of credit would be considered a loan and reduce your net worth. Assets less liabilities = Net worth

I agree with Butterfly. I have had clients work around limatation like that with friendly loans that are "off book" so to speak. A loan from a family member that is unsecured.

However, I would advise against that kind of investment (from the sound of it) if you have to borrow to do it. You don't want to get a capital call and not have the assets to do it.

I guess what I am trying to say is this, I would bet you could work the problem and get around their limitation, but would you really want to?

so, you think I could get a loan from a family member, then after everything goes thru and gets finalized take out a home equity line of credit and pay them back?

btw, I am looking into buying into a franchise (if approved I will tell you all more details) and their requirement is $100,000 networth and $40,000 up front cash. As of right now I can only come up with around $25,000 cash on my own without taking out a home equity line of credit.

Originally posted by Prince
so, you think I could get a loan from a family member, then after everything goes thru and gets finalized take out a home equity line of credit and pay them back?

btw, I am looking into buying into a franchise (if approved I will tell you all more details) and their requirement is $100,000 networth and $40,000 up front cash. As of right now I can only come up with around $25,000 cash on my own without taking out a home equity line of credit.

Yes, sounds like you should not have too much difficulty getting around that requirement. I guess the question you will have to answer is "Will I have the cash to operate the business?"

I know many people who hate debt so much that they pay off their mortgage ASAP. To them that is their savings. I don't think what you are talking about doing is unreasonable at all. Borrowing against your house to start a business is very common. It generates some tax issues as to where to deduct the interest, but that is another thread.

Another thing, I don't know how well this franchise company is going to look into your finances. You will need to be prepared to answer as to where the money came from. If it is not on any statement and yet you have it, it came from somewhere.

Maybe it was a gift?

Many people don't trust banks. He can say he just saved his money for years.I know several old men who died and had suitcases full of money under their bed! Not too smart IMO, but they did it.

Gifts of $10,000 or less per year are non-taxable.

I don't think they will buy the "I saved the money up in a suitcase" pitch. They are going to want to knoe where every last pennie of it came from. You could always say the family member that puts up the rest of the money is a silent business partner.

As long as you have the cash up front, why do they care where it came from. None of their business.

Originally posted by butterfly
Gifts of $10,000 or less per year are non-taxable.

I don't think they will buy the "I saved the money up in a suitcase" pitch. They are going to want to knoe where every last pennie of it came from. You could always say the family member that puts up the rest of the money is a silent business partner.

It's $11,000 now and with gift-splitting there should be no taxable gift anyway. If there was, it is taxable to the donor and they can use their unified credit and not pay any tax.