In most cases, business owners carefully consider the terms, including interest rates, number of months, total amount of the repay, and early payoff considerations. Not often enough do business owners consider whether or not they will qualify, and other detailed conditions of the loan. If a business loan has good basic terms, but is very difficult to qualify for, then the fact that it has advantageous terms may not be very relevant.
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Some lenders can place one or two conditions on a line of credit which can completely negate all of the other advantages of the financing. For instance, for some lines of credit, the lender may come in at the last moment and require the borrower to put up residential real estate, or even their primary residence as collateral. When the lender does this, the borrower should be savvy enough to see that this is worse than if they had taken out a home equity line of credit because even on a home equity line of credit, only the house is taken as collateral.
If the lender is asking for the applicants primary residence on top of a business line of credit, and the borrower agrees, then they are agreeing to doing a home equity line of credit and offering to give the bank many of their business assets as collateral as well. Unless the borrower really needs that financing that is being offered, borrowers would be advised to look for other financing, or attempt to negotiate the terms of the approval with the lender.