October 2019

October 31, 2019February 15, 2023

Grow Your Small Business While Avoiding Debt

Of the 30 million small businesses in the United States, only half will survive for five years. That’s because 27% don’t receive the funding they need. It becomes a self-fulfilling prophecy: When a small business can’t get financing, it limits production and sales, the ability to hire employees, purchase new equipment, and/or market to customers.

A U.S. Bank study showed that 82% of small businesses fail because of cash flow problems. This is especially true for seasonal business owners, like landscapers or holiday-themed vendors, who need sustainable financing for the leaner off-season months.

Chances are, whether you run a pottery studio, a real estate office, or a hair salon, a boost in cash flow increases your chances of long-term success. Here’s how you can secure funding and several ways you can use it to maximize small business growth.

3 Ways to Secure Small Business Funding

1. Small Business Loans

When looking for financing, many small business owners look to small business loans backed by the Small Business Administration (SBA), called SBA loans. Whether it’s from a local credit union or a nationwide bank, these loans can provide access to much-needed capital, although approval is not guaranteed. In fact, you could be denied a small business loan because of bad credit, not enough collateral, or even incomplete paperwork. You could also be denied a loan if you’re just starting out, or if your business is considered risky, like a restaurant or cafe.

In addition to the possibility of being turned down for a small business loan, you’ll also be agreeing to take on debt, with varying interest rates and repayment time periods based on your small business’s unique circumstances. And depending on how your small business fares in the coming months, particularly if your projections don’t align with real results, this debt could become an additional strain on your operations.

Read “Small Business Loan vs. Home Equity Loan: What’s Best for Your Business?”

2. Crowdfunding

Nowadays, many small business owners turn to crowdfunding to launch or sustain their small businesses. Crowdfunding is the process of requesting money online, often via your social media networks, to underwrite a project, and it typically comes with a specific monetary goal and obligations based on the donation.

For example, let’s say you want to launch a catering business. You could start a crowdfunding campaign using a site like GoFundMe with a goal of getting $10,000 in donations by the end of the month. Perks could include a homemade dinner for each person who donates $100, or weekly dinners for a month for donations of $1,000.

If you reach your $10,000 goal, there are no monetary repayments, but you’re on the hook to deliver what you promised and you may face tax obligations. Additionally, there’s no guarantee your campaign will succeed, leaving you where you started: without funding.

3. Home Equity Investment

If a small business loan or crowdfunding don’t appeal to you, you may be able to secure financing for your small business by accessing the equity in your home. A Hometap Investment, which enables homeowners to quickly access funds without debt, monthly payments, or interest, could be an attractive way to support your small business.

Unlike a small business loan, your home equity investment won’t impact your credit score. Unlike crowdfunding, you won’t have to hustle for donations or take time and resources away to fulfill donor rewards. And, unlike a home equity loan or home equity line of credit (HELOC), you’re not putting your home at risk. You’ll simply get the funds you need, fast, so you can reinvest in your small business. Your investment is settled when you sell your home or buy out the investment.

How to Use That Funding to Accelerate Small Business Growth

Once you’ve decided which funding method makes sense for you, you’ll want to use your funds in a way that helps maximize your business growth. Here are a few strategies used by successful small business owners.

Invest In Professional Development

Professional development, whether specific to your industry, like earning a certificate in graphic design, or general, like attending a seminar to improve your customer service processes, can boost your skills and help you adopt best practices to grow your small business. As you consider different opportunities, determine how each one will tie back to business outcomes, so you can get the best return on investment.

Boost Your Marketing Efforts To Build Brand Awareness

Does your small business need new customers? Use your new financing to launch new marketing campaigns, or boost existing ones, to drive traffic, generate leads, and increase sales. Depending on your business and audience, you could emphasize digital retargeting campaigns via your blog and social media, start a direct mail campaign, run ads on local radio and TV networks, or test a combination of traditional and digital marketing efforts to see what’s most effective.

Create Loyalty Opportunities

Alternatively, you may already have a healthy roster of customers, but need to re-engage them and encourage repeat business to boost your bottom line. Trying using your new financing to support a new or existing loyalty program, like multi-purchase reward offers, a sweepstakes for product giveaways, or refer-a-friend bonuses.

Explore Opportunities To Automate Or Scale Business Growth

Up to this point, manual, cumbersome, and/or inefficient processes may have hampered your small business growth. But with your newly available financing, you can bring on new systems to grow and scale quickly and efficiently, which may enable you to boost production, reduce costs, and increase sales. Opportunities could include integrating new customer relationship management (CRM) software, hiring an agency partner to manage your marketing campaigns, or opening an additional location to break into a new market.

Truly, your small business growth options are only limited by your imagination—and your access to funding. If you can get financing for your small business and minimize your debt, you’ll be well on your way to being part of the top half of small business owners who enjoy sustainable success.

Take our 5-minute quiz to see if a home equity investment is a good fit for you.

LEGAL DISCLAIMER

The opinions expressed in this post are for informational purposes only. To determine the best financing for your personal circumstances and goals, consult with a licensed advisor.

October 29, 2019January 5, 2023

4 Ways to Finance Your Home Addition or In-Law Suite

Are you looking for ways to finance a home addition? Across the country, the number of people living in multigenerational households is on the rise. According to the Pew Research Center, more than 20% of the population shares their homes with at least one other adult generation. That’s up from 12% in 1980.

Enter the in-law suite: They empower multiple adults to live under the same roof while still maintaining separate living spaces. Below, we’ll cover the different cost aspects to consider, the different types of additions, and how to finance a home addition.

Comparing the Costs of In-Law Suites, Nursing Homes and Assisted Living Communities

For some families, having a parent or grandparent move in makes smart financial sense. Especially if said parent or grandparent needs extra help with their day-to-day activities, has mobility issues, or health issues that need close looking after.

If you compare the cost of paying rent at a nursing home or assisted living community versus building an in-law suite, it may make more financial sense for your situation, even if you factor in the cost of a companion or visiting nurse to help with chores and caregiving.

Read 3 Ways Home Equity Can Fund Your Retirement

Added bonus: The in-law suite could be used for other purposes—an Airbnb rental, guest house, or office—when it’s not needed by a family member.

Is an In-Law Suite Right for Your Family?

The first question to ask yourself before starting your in-law suite journey might not be what you’d think: Is it legal?

Many neighborhoods, cities, and counties have rules regarding the size and types of additions you can build on your home or how you can remodel a space like a garage or basement. When it comes to building a separate structure, often referred to as an accessory dwelling unit, or ADU, the rules may be even tighter.

Start by calling your city’s zoning office to find your area’s rules and regulations. Then contact a builder or architect for a vision of what’s possible within those limitations. If substantial renovations are needed, you can consider expanding your liability coverage as it could help cover legal fees if someone injures themself on your property. As more people will be going in and out of your house, it could be helpful to look into how multigenerational housing will impact your home insurance policy moving forward.

Before you break ground, it’s also important to consider the emotional impact of having family members move into what was previously your personal space. Your parents or grandparents may also have concerns about moving in together. Establishing open lines of communication early in the process will help ensure the arrangement is a success.

Using Home Equity to Finance a Home Addition

Once you’ve done your research and talked with your family, then it’s time to consider your funding options. Here are some of the best ways to finance a home addition like an in-law suite.

1. Home Equity Loans

A home equity loan will give you a large chunk of cash you can use to finance the construction of your in-law suite. Your loan may have a fixed or variable interest rate. In general, home equity loans offer shorter maturities than the original mortgage you took out on your home (meaning you’ll have to pay them back faster).

2. Home Equity Lines of Credit

A home equity line of credit (HELOC), is a revolving loan. It works in a similar fashion to your credit card. Your lender will set aside a predetermined amount of money that you can borrow from at any time. During the “draw period,” typically five to 10 years, you can borrow as much or as little as you need to fund your in-law suite construction. Some HELOCs require you to pay back everything you borrowed as soon as the draw period ends. But most offer a payback period of up to 20 years, during which you pay back the interest and principal in regular installments.

3. Reverse Mortgages

Homeowners who are 62 and older have an additional option for financing the construction of their in-law suites: a reverse mortgage. This program allows them to borrow against their home equity without having to pay an additional monthly fee. But there is a catch: The loan has to be repaid as soon as the borrower passes away or moves out of the home. This is usually accomplished by selling the house. If you want to leave your home to children or other family members, this may not be the best option.

4. Home Equity Investments

Unlike traditional home equity loans or lines of credit, there are no monthly payments or interest when you use a home equity investment product like Hometap. Instead, you offer the equity investment provider a share in the future value of your home in exchange for a lump sum of cash. You get the money you need now to finance your in-law suite, without having to deal with a new loan or credit program.

If you’re looking for the best way to finance a home addition, the answer isn’t one-size-fits-all. It will depend on your financial goals, you, and your property.

If building a home addition makes sense financially and emotionally for your family, compare your funding options to determine which solution is best for you.

Take our 5-minute quiz to see if a home equity investment could be the solution for you to finance your home addition.

YOU SHOULD KNOW…

We do our best to make sure that the information in this post is as accurate as possible as of the date it is published, but things change quickly sometimes. Hometap does not endorse or monitor any linked websites. Individual situations differ, so consult your own finance, tax or legal professional to determine what makes sense for you.

October 23, 2019March 22, 2021

Homeowners are feeling ‘house rich, cash poor’

One in five U.S. homeowners say they feel house rich but cash poor, according to the newly released Hometap Homeownership Study. The rising costs of homeownership nationwide prompted nearly 20% of 675 homeowners surveyed to classify themselves as feeling “house rich, cash poor” most of the time, according to the study produced by Hometap, a firm that provides loan alternatives for tapping home equity. Seventy-three percent of respondents say they feel “house rich, cash poor” at least some of the time. This article originally appeared on Realtor Magazine. Read the full article.

October 22, 2019October 27, 2020

New study shows 1 in 5 U.S. homeowners feel house rich, cash poor — and it’s getting worse

Hometap, which provides a smart, new loan alternative for tapping into home equity without taking on debt, announced today the results of its first annual Hometap Homeownership Study, a comprehensive look at housing costs and affordability for U.S. homeowners. 675 U.S. homeowners participated in the survey, conducted in June 2019 by online polling firm AYTM.

Results of the survey illustrate that rising housing costs across the country and worsening income-to-mortgage ratios are causing nearly 20 percent of U.S. homeowners to classify themselves as feeling “house rich, cash poor” most or all of the time, impeding their ability to achieve other important financial goals. Many of those homeowners are pessimistic about this issue improving anytime in the near future, and are struggling to find solutions for it.

“We knew there were pockets of homeowners who felt house rich, cash poor — we see that every day in our work — but were surprised to find that 1 in 5 feel that way so often,” says Jeffrey Glass, CEO of Hometap. “Mortgage rates are at historic lows, which is encouraging more people to buy, but despite 45 million homeowners with excess equity, we’re seeing really conservative behavior — perhaps a lasting effect of the 2008 financial crisis. Unless wages start to rise relative to home values, we’ll see more homeowners falling into the house rich, cash poor category.”

The results of the survey identified three major U.S. homeownership trends, analyzing both nationwide averages and generational differences:

U.S. homeowners are burdened with the feeling of being house rich, cash poor, the uncertainty of future income, and home maintenance costs.

Nationally, 19.5 percent of homeowners feel “house rich, cash poor” most or all of the time.
73 percent of homeowners (3 out of 4) feel “house rich, cash poor” at least some of the time.
The main stressors for homeowners are uncertainty of future income (cited by 82 percent) and anticipated costs of home maintenance and repairs (81 percent).

Millennial homeowners are struggling to achieve financial goals, and are focused on helping their children (or future children) avoid similar setbacks.

60 percent of Millennial homeowners agree/strongly agree that housing costs make it difficult to achieve their financial goals.
19 percent of Millennial homeowners (about 1 in 5) say that 50-100 percent of their monthly income goes toward their mortgage payment.
36 percent of Millennial homeowners (about 1 in 3) are also paying off student loans.
Millennial homeowners were most likely to be stressed about saving for children’s college (42 percent) and helping children buy a home someday (15 percent) compared to Gen X and Baby Boomers.

Homeowners expect the house rich, cash poor epidemic to get worse.

66 percent say housing costs are rising faster than income.
77 percent expect that gap to get worse.
57 percent said they can’t find solutions to alleviate being house rich, cash poor.
73 percent don’t want to take on more debt through traditional financing options such as home equity loans.
12 percent (1 in 8) say they would not be able to get a loan or sell house.

While the “house rich, cash poor” epidemic appears to be impacting homeowners across generations fairly equally, millennials are taking the biggest hit in terms of the impact this issue is having on their ability to achieve other financial goals — many of which relate to helping their children with future financial investments, such as college tuition and purchasing a home.

“This may be surprising to some, since Gen X homeowners would presumably have children getting ready for college and/or buying their first home,” says Glass. “But because many Millennials are saddled with more student debt than previous generations, I believe they are highly motivated to help their children graduate college with little or no debt to avoid many of the financial stresses that they’ve endured.”

“This study from Hometap makes clear that homeowners think there’s a problematic gap between housing costs and income,” says Jeremy Sicklick, CEO of HouseCanary, “but what homeowners need to keep in mind is that on average home values tend to increase steadily across the U.S. It seems likely that homeowners will start to see their properties as usable financial assets that allow them to be more authoritative in managing their financial situations.”

To download the full report, “Is Homeowner Debt Getting Worse? A Look Inside the House Rich, Cash Poor Phenomenon,” which has detailed data including breakouts for six major cities (Boston, Charlotte, Denver, Los Angeles, Orlando and San Francisco), visit https://www.hometap.com/reports/is-homeowner-debt-getting-worse.

About Hometap

Hometap is a smart new loan alternative for tapping into home equity without taking on debt. Homeowners receive debt-free cash by selling a percentage of the equity in their homes to Hometap. They can use the cash for anything, from paying off credit-card debt to starting a business to buying a second home. When the home sells or the homeowner settles the investment, Hometap is paid out an agreed-upon percentage of the sale price or current appraised value. Learn more at https://www.hometap.com/.

October 22, 2019June 17, 2022

Study Shows 1 in 5 U.S. Homeowners Feel House Rich, Cash Poor

BOSTON (Oct. 22, 2019) Hometap, which provides a smart, new loan alternative for tapping into home equity without taking on debt, announced today the results of its first annual Hometap Homeownership Study, a comprehensive look at housing costs and affordability for U.S. homeowners. 675 U.S. homeowners participated in the survey, conducted in June 2019 by online polling firm AYTM.

The results of the survey identified three major U.S. homeownership trends, analyzing both nationwide averages and generational differences:

U.S. homeowners are burdened with the feeling of being house rich, cash poor, the uncertainty of future income, and home maintenance costs.

Nationally, 19.5 percent of homeowners feel “house rich, cash poor” most or all of the time.
73 percent of homeowners (3 out of 4) feel “house rich, cash poor” at least some of the time.
The main stressors for homeowners are uncertainty of future income (cited by 82 percent) and anticipated costs of home maintenance and repairs (81 percent).

Millennial homeowners are struggling to achieve financial goals, and are focused on helping their children (or future children) avoid similar setbacks.

60 percent of Millennial homeowners agree/strongly agree that housing costs make it difficult to achieve their financial goals.
19 percent of Millennial homeowners (about 1 in 5) say that 50-100 percent of their monthly income goes toward their mortgage payment.
36 percent of Millennial homeowners (about 1 in 3) are also paying off student loans.
Millennial homeowners were most likely to be stressed about saving for children’s college (42 percent) and helping children buy a home someday (15 percent) compared to Gen X and Baby Boomers.

Homeowners expect the house rich, cash poor epidemic to get worse.

66 percent say housing costs are rising faster than income.
77 percent expect that gap to get worse.
57 percent said they can’t find solutions to alleviate being house rich, cash poor.
73 percent don’t want to take on more debt through traditional financing options such as home equity loans.
12 percent (1 in 8) say they would not be able to get a loan or sell house.

About Hometap

Take our 5-minute quiz to see if a home equity investment is a good fit for you.

October 22, 2019March 22, 2021

Are housing costs changing buyer preferences in Boston?

Massachusetts has the fifth costliest mortgages in the country, according to a report from alternative lending company Hometap. The report estimated the average monthly mortgage payment in the state to be $1,333, and annual home maintenance costs averaged out at $17,461. “It’s no wonder, then, that the top stressor for Boston homeowners is the cost of home repairs and maintenance,” the report’s authors noted. “Eighty-one percent of those surveyed answered that they’re moderately to extremely stressed when factoring this potential cost into the big picture of homeownership.” This article originally appeared on Boston Agent Magazine. Read the full article.

October 8, 2019June 17, 2022

4 Steps to Personal Financial Planning (without an Advisor)

If some of your goals include being more self-sufficient and cutting out unnecessary costs, we’ve got good news for you: You don’t need to hire a financial advisor to create your own financial plan.

If you’ve been thinking about buying a second home, saving for retirement (before you turn 50), paying for college, or any other goal that involves a major investment, you’ll need a financial plan. While the concept of a financial plan may seem daunting at first, it doesn’t need to be complicated: Simply put, financial planning is the process of making a specific plan for your money that will help you reach your unique goals.

See how your financial goals compare with other homeowners around the U.S. Our 2021 Homeowner Report is out!

While you could reach out to a financial advisor, here’s a little secret: You may not necessarily need one. In fact, with a little research and a can-do attitude, you can create a financial plan without an advisor.

Here’s how to get started.

Financial Plan Step 1: Determine Your Financial Goals

First thing’s first: With any financial plan, you’ll want to determine your goals, prioritize them, and come up with a timeline for when you want to reach them. Think along the lines of:

“I want to buy a lake house in two years.”

“I’d like to retire at 65.”

“I want to pay for college when my kids are 18, so they don’t have to take out too many student loans.”

“I want to take a trip to Tanzania next summer.”

Your goals will be personal, specific to you, your situation, and your schedule. Your friends and family may have very different goals and plans, and that’s OK! Eliminate the idea of “shoulds” or “supposed to”— that’s not what a financial plan is about. You always want to remember that your financial plan is designed to build the life you want.

Once you have your key goals and potential timeline in mind, the next step is putting together a budget.

Financial Plan Step 2: Crunch the Numbers

To get started with a budget for your financial plan, you’ll need to know what you’re working with each month. You can use a simple spreadsheet, online tools like Mint or YouNeedaBudget (YNAB), or even just plain paper and pencil.

Regardless of how you budget, in every case you’ll be figuring out how much money you have coming in and how much you’re spending, looking specifically at all your monthly credits and debits.

Your monthly credits will tally up your monthly income, including anything you’re earning from a full-time or part-time job, a side hustle, or contract work. If your income varies, consider using a typical average for a given month, or even be a little conservative and put in the lower-end of what you could earn to give you some wiggle room. For debits, list out your typical bills and expenses each month. You can DIY your budget doc, using templates in Google Sheets or Excel, or you can find some free templates that work for you and modify them to meet your needs, like this one from Vertex42.com.

Compare the totals, looking at your monthly income against your monthly expenses. How much do you have left over to work with each month? With your budget, will you have enough to save or invest to achieve your goal, when you want to achieve it?

If the amount isn’t satisfactory to you, take a look at your discretionary spending first, such as cable, dining out, and other means of entertainment. Can you eliminate some of your expenses or embrace less-expensive options to free up more money?

It’s also worth shopping around some of your utility expenses every so often to get better rates on everything from rubbish disposal to cable and internet. (You may even negotiate better rates sticking with your current providers!)

If earning more sounds like a better option, could you negotiate for a raise with your employer or take on a side hustle? You may find that a combo of cutting back on expenses, while aiming to earn more at the same time, could make sense for you, your situation, and your goals.

Getting organized and being intentional can also go a long way. For example, you could designate specific credit cards for specific expenses, like one card just for utilities, one card just for entertainment, one just for emergencies. You could try a cash-only approach, to become more mindful of your spending habits. If you need extra motivation, you could recruit a finance 101 buddy, much like a gym buddy, to practice better financial habits along with you and keep you accountable.

Remember, you can always adjust your timeline, too. If you’ve crunched the numbers and discovered that it may be too much of a stretch to buy a house in the next two years, see if it’s more feasible in three to five. Being flexible and creative is all part of building your financial plan.

Financial Plan Step 3: Check In Regularly

Once you’re up and running with your budget, don’t just set it and forget it: It pays (literally) to check in regularly. A good rule of thumb is to check in once a month to make sure you’re on track and making progress toward your goals. Checking in monthly allows you to see if you’re hitting your milestones and make smart adjustments so you stay on track.Seeing little wins along the way, like becoming debt-free or seeing the extra income your side hustle brought in, can motivate you for the long haul.

Speaking of the long haul, financial plans are designed to be adaptable as people grow and change, so it’s also smart to plan a yearly “big picture” overview to see if your plan still makes sense for your situation. For example, over the past year, you may have gotten a raise, paid off a student loan, or bought a house. So, your financial plan may need a few tweaks to address your new circumstances and to address any new goals you’ve set for yourself.

Financial Plan Step 4: Tap Into Your Largest Asset

Of course, life is unpredictable, and with any long-term financial plan, there may be unexpected situations along the way. Medical bills, car trouble, home repairs, and the like can all derail even the most carefully crafted financial plan.

As a homeowner, don’t overlook one of your biggest advantages: home equity. Partnering with home equity investors like Hometap can give you a percentage of your home’s equity now in exchange for a share of the future value of your home. If you find your goals are just out of reach due to high-interest debt, or something unexpected throws off your financial plan, you can use a Hometap Investment to bulk up your savings and get your plan back on track.

Take our 5-minute quiz to see if a home equity investment is a good fit for you.

LEGAL DISCLAIMER

The opinions expressed in this post are for informational purposes only. To determine the best financing for your personal circumstances and goals, consult with a licensed advisor.