THE PRIVATE 2. MORTGAGE AS GOOD BUSINESS LOAN
In the February / March 2017 – ERFOLG issue, Dr. Teddy Amberg* shows how small and medium-sized companies can use their private property as collateral for a favourable business loan.
Nowadays it is becoming more and more difficult for SMEs and self-employed to get a business loan on favorable terms. Above all, the fact that they can not provide any collateral makes the loan even more expensive. A good alternative can be the 2nd mortgage for business use. As collateral, you can use your own house or your own home.
The problem of SMEs and the self-employed
Compared to large companies with more than 100 employees, smaller companies with less than ten employees or self-employed have a very difficult time to obtain a business loan from banks. Due to the high requirements of the banks, they are usually rated lower in risk assessment. If they receive a loan, they usually have bad conditions and interest rates of up to 10% p.a.
Missing collateral leads to unfavorable conditions
Banks and credit providers are usually justified by the fact that no collateral can be deposited. But is it not quite natural, that young companies can only build up little substance at the start? Another example are IT companies. They can not prove classic collateral such as large machines or equipment. However, an alternative to classic collateral can be the private property. Self-employed and corporate owners, who have their own house or their own home can state this as collateral.
The private property as collateral for business loans
If the current mortgage burden is low enough, the required loan sum can be included in a second mortgage. This is possible if a part of the mortgage has already been amortized. The second mortgage is then also recorded as a debt letter in the land register. This admission to the land register can now take place electronically in most cantons. As a result of the increase in the mortgage burden, company founders of small enterprises and self-employed can now benefit from more favorable conditions. Usually the interest for a second mortgage is 4-5% p.a.
You should pay attention
The following conditions should be met in order to accommodate a second mortgage:
- – The total mortgage burden of your property should currently be no more than 60-80%.
- – Same as for the 1st mortgage, the costs for the 2nd mortgage will also included in the affordability calculation.
- – A second mortgage usually has to be amortized by monthly installment payment.
Digital alternatives for an affordable 2nd mortage
Currently, banks and traditional credit providers are not very flexible when it comes to raising the mortgage if the funds are used for their own company. Above all, amounts below CHF 100,000 are usually too expensive for banks. We are a digital alternative, CreditGate24. With us you can get mortgage-secured business loans already from 4.4% interest.
Apply now for your secured sme loan or give us a call. Together we will find your optimal financing.
Read the full report: Erfolg-Ausgabe: Die private 2 Hypothek als Firmenkredit (only in German)
* Dr. Teddy Amberg is a partner at CreditGate24 and he is the Head of Business Development.