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Valued Member
Homeowner13
Posts: 36
Registered: ‎05-04-2008
0

SBA Help in finding the best path for success!

Ok so here is my story. My wife and I are planning on moving this next summer, when we move she is wanting to open her own business (she needs about 25-30k to do so) I have a few questions about what people think is the best case situation.

 

 

First of all let me explain our situation. We have both been employed at our current jobs for 5+ years. Our combined income is about 70K. Our Credit card utilization is at about 3% of 37k.(plan on it being $0 by the end of the spring.)  We have about 20k in checking and savings. It should be about 3-5k more by then. I have a business loan that does not show on my personal credit for about 140k left on the loan. (investment property) The property is valued at 210k. I have a student loan of about $300 per month (our only long term debt between our two credit reports). My credit score has been running in the 780-809 range hers is in the 740-760 range. 

 

Ok so here is where things get interesting. When we move we want to buy a new house and start her business. I have been working this over in my head many times.

What do you think.

1. We open the business and use all of our saving to do so and rent for a year or two (hard to think of doing that with rates so low) and then buy a house? We could stay with family for a bit if we needed to (up to 6-8 months) to help save more money up

2. Do we buy the house with the money we have saved. (Looking at a house in the 100-130k range and try to get a loan for the business (she wants to open a nail shop)

3. Split the money and put less down on the house say 5% and use the other part to start the business and finance the rest on our credit cards. We get lots of 0% for 18 month offers right now. So about 10k on the credit cards. 

4. Some other idea that I haven't thought of yet that all you wonderful people might think of?

 

A few remaining questions.

1. Which do we do first buy the house or start the business?

2. Do you think it is possible for us to get a SBA through a bank for a business like this or is that just a pipe dream? She has been working part time in a nail shop for the past 5 years so she is very familiar with how they work and what they need to run. She has a solid business plan and knows the opening expenses outside of the location rent. Her plan is extremely detailed down to the little things needed as well as the projected amount of income for the first second and third years. Having a investment property has helped because I had to come up with expense reports and income reports before getting it.

3. Do you think my investment property is a plus or minus at this point? I want to keep it if possible because it is running in the black at this point and I have long term tenants locked in for at least 3 more years.
PLEASE HELP! 


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QueenofReinvention
Posts: 106
Registered: ‎12-01-2012
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Re: SBA Help in finding the best path for success!

Hi Homeowner13! Ok, I'm sure others will chime in, but I do have an intial question. Are you going to be working when you move? It isn't clear when you say you are moving, if you are moving somewhere in the same city/state, or if you are moving to another city/state. Here is how I see it if you are staying in the same city/state, and you will be continuing to work:

 

  • Find out if it is possible to get an equity line from your investment property. If that is possible,  you may be able to do both the home and business at the same time.
  • If you are able to obtain an equity line against the investment property, then I would look at trying to secure a home at a low end price (negotiate, negotiate, negotiate), so that you can have some automatic equity when you move into the home. Example, if you can obtain a $125k home for $100k, and the property is appraised for the $125k, then you will have some equity in that property that you may be able to take out to add towards your wifes' business.
  • I don't know what type of loan you are looking a for your mortgage, ie FHA, conventional, etc, but if you can get one and put down the minimal as possible (on your 100k-130k home) then you will still have some money to likely open her business too.

If you are moving to another city/state, and neither of you will be working, then I think you will be hard pressed to secure a mortgage or even a business loan, because you won't have any income, and even though your wife will be in the same line of work (since she's been working in the nail salon for 5 years); working at a business, and owning a business are two different things. The lendors for  your mortgage will need to see tax returns, etc, and given that she hasn't started the business yet, they won't be able to gauge how much money she'll realistically be making; especially since she won't have 2 years of tax returns running the business. If you are working, and she is starting the business, you may have to qualify on the loan by yourself if she's starting the business, because again, technically, she won't be showing any income. While I know she'll be working her butt off to make her business succeed; loan/mortgage companies don't look at it that way, nor care. They want to know how you are going to pay a mortgage, and if you have no money, then in their eyes, you can't make a mortgage payment.

 

Once you supply a bit more information, I'm sure you can get more advice. Best!

Valued Member
Homeowner13
Posts: 36
Registered: ‎05-04-2008
0

Re: SBA Help in finding the best path for success!

We would be moving out of the state. Before we move I would be getting a job/ securing a job in the new location. If I don't get the job we won't move. Thank you for your comments. I didn't know how that worked with moving out of state. My pay should be enough to get the loan for 125k, 35-40k at my new job.

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Project17
Posts: 137
Registered: ‎11-21-2012
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Re: SBA Help in finding the best path for success!

[ Edited ]

Usually if you want to be a home owner and a business owner you buy the house first then a start a business.. Either way I don't think dumping all your cash into the business would be a wise idea if you can finance some of it on credit cards I would do that..

 

Getting a loan may or may not happen.. You don't need a ton of money and your credit is perfect, the business it self is a little iffy industry wise so that could hurt or even get you denied.. Keep in mind those are fairly easy businesses to open and run and you will have a lot of competition and thus making the fail rate pretty high.

 

The house will always be worth something but the business could go a bankrupt in a few months!

 

A better idea would be if she could find a partner to invest and work with. 


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