Do I Have to Pledge my Home as Collateral in a Business Acquisition?
One concern that many clients have is whether or not they have to pledge their home as collateral for a business acquisition. The answer to this question can vary depending on many elements of the business acquisition. If you apply for a loan through the SBA (Small Business Administration), you will not typically have to pledge your home as collateral if your home’s equity is less than 25% of market value.
If the business being acquired does not have the ability to work with the SBA, they can utilize asset-based loans or cash flow loans. These loans are short term loans that allow financial flexibility for businesses recovering from company changes, expansions or mergers and acquisitions.
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