FORTUNE Small Business:

Should I buy a house first, or a business?

Ask FSB weighs in on whether it's wise to buy a house before seeking a business loan.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)

home_loan_buy.ce.03.jpg
Ask FSB
Get small-business intelligence from the experts. Here's a chance for YOU to ask your pressing small-business questions, and FSB editors will help you get answers from the appropriate experts.
Your name:
* Your e-mail address:
* Your city:
* Your state:
* Your daytime phone #:
* Your questions:

(FORTUNE Small Business) -- Dear FSB: My friend and I are planning to buy an existing business. My friend owns a house, but has no equity, and I'm in the process of buying a house. Will purchasing one affect our chance of getting a business loan from a bank? What would be best - to buy a house first, or buy the business first?

- Paolo Perez, Fountain Valley, Calif.

Dear Paolo: If you have sufficient income to fund the purchase of both a home and business, the order in which you do it shouldn't be an issue.

According to Christy Schmitt, senior vice president of small-business banking at the Union Bank of California, banks will dive deep into your financials when deciding whether or not to grant a business loan - but taking out a business loan when money is tight could affect your ability to get a house. She advises that you wait until you have sufficient cash flow for both to do either.

But if you want to make a move now, Mark Hogan, the president of small business banking at Bank of America (BAC, Fortune 500), suggests that you buy the house first.

"When you're looking at a mortgage in today's environment, everything needs to fit neatly," he says. According to Hogan, a mortgage doesn't count as a negative to bank lenders, but a business loan is a potential negative for mortgage companies.

What does matter to banks?

"They'll want to look into the financials of the business you're buying - is it running well? Does it have a good client base?," Schmitt says.

Hogan adds that they'll ask what your cash flow looks like and how you've paid debt in the past. And while building equity looks good to bankers, in California's currently wobbly real estate market, buying a house might not add much value. To top of page

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More

Sponsors

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.