But the reality is that lenders may be unlikely to agree to this unless your business is of a certain size, has predictable revenues, and/or you are a repeat customer with an existing arrangement and a good credit history.
And then you might be able to pay off only “It really depends on the type of debt and if it will free up some cash each month,” says Ryan Michler, registered representative for Mc Partland Group Financial Services in St. “Your goal is just not to eliminate debt, but to get cash flow once again.” For example, Michler says, if you are liquidating assets to put toward your home loan, but not paying it off, it will not free up extra cash since your payment amount doesn’t change and will do nothing to improve your current financial situation.
“However, if it is an open line of credit or a revolving account and you’re liquidating ,000 to pay off a significant portion, say ,000 in debt, then you are freeing cash and you can begin reducing the rest of the debt or saving again,” he says.
If you agree to offer your home as security for a business loan you take out, your limited company status will give scant protection.
If you are at all uncertain, you should take legal advice.'Once you have the money, there are several hurdles that could trip you up.
As soon as the liquidator is appointed, they’ll take control of the business.
For a start, avoid sticking your head in the sand when all is going well.
His wife, a contract employee working from home, lost her job. “We’re just stuck in that cycle of making minimum payments,” says Rapp. The 43-year-old says he cannot file bankruptcy or do anything that would harm his credit, as his employer pulls credit checks routinely. “I’ve come to the realization that 65 is really a mythical age for retiring anymore,” says Rapp.
“I plan on working into my mid-70s.” “I usually advise people not to cash in their 401(k), IRA, life insurance or sell their home,” says Greg Mc Graime, a Certified Financial Planner with Pricewaterhouse Coopers in New York City.
Medical bills quickly ate up the maximum on their health insurance, and there were child care expenses for their two older children while the Rapps stood vigil at the hospital.
“The incidental expenses, such as eating out two or three times a day, made for a really expensive spring and summer,” says Rapp. However, penalties and taxes would eat a large percentage of the withdrawal, plus Rapp had previously taken out a 401(k) loan that remains outstanding.
If the firm should fail, a sole trader’s business debts could become personal debts – and the business’s creditors may pursue them personally for payment.