i've found it's more common then not to have to put your house up for a business loan. That may be different in a 'homestead' state like Texas, and it certainly doesn't hold for professions like lawyers, accountants, dentists and the like where the degree on the wall lessens the risk, but in other small businesses, and even for many commercial leases, the personal guarantee is often not negotiable until the business is very well established. And losing $450K in construction is not that hard. Of couse there are good risks and bad risks, and they very well may have made many very dumb decisions, but putting you house up isn't necessarily one of the bad ones.
That's what the banks want you to believe, but it's not true. I am sorry this is something that bothers me a lot because every year I see one or two people lose everything because their small business fails. Especially something as high risk as construction. Small businesses with little overhead do much better than something like construction which has huge overhead as well as slow turn around profit. I don't think they were stupid to try to build a business of their own, I think they didn't go about it in the smartest way.
Thanks Hayes. Must be a jurisdicitional thing. Where I'm from a personal guarantee includes your house. Managing risk is something most first time small business operators are very poor at.
It just seems like a bad idea, regardless of the norm, to put nearly every penny you have at risk to build a business when you have other considerations. Perhaps starting a business that requires blowing through $450,000 in investment in less than a year is not the way to go (I had read that they received this loan in early 2007). And since this guy supposedly ran his own home security system business prior to getting the Extreme Makeover house, you'd think he'd be well aware that most businesses take time to generate sufficient revenue to cover the operating expenses, let alone the start-up costs.
It seems obvious they should've started smaller. They could've done simple renovation and repair work first. That way you make money, there's very small start up costs, and if it doesn't work out you've lost almost nothing. One day you decide it's not working out, the next day you open up the classifieds and look for another job, problem solved. Due to our business, we deal with many other businesses that were started by a single person and evolved into a successful home repair, electrician, plumbing, or construction business and they all started out that way.
just curious..where are you from? a personal guarantee could include an entry way to your house if they get a judgment in a state where homestead protections aren't as strong as they are in texas..but that's still very different from putting your house up as collateral.
Hell ta tha Yeah!!!! Let's just agree that they didn't do the smartest thing and leave it at that...They tried to better themselves, made a dumb decision that affects them and others and now they're having to pay the consequences... However, to think ABC isn't partly to blame is a little short-sided, IMHO...ABC's "show" hyped them and the house and they wanted to live up to the standards of the new home...what about property taxes, utilities, etc...it all costs money, more than they had before...
they tell them about property taxes...utilities..etc. they paid off the mortgage. beazer homes gave them $100,000 cash. they were given another roughly $150,000 from other groups in the community. they had a fund to deal with utilities and property taxes. they also point them towards financial advisors. they had a craphole house and they got a new one for free with a big wad of money. i'm sorry, but i have a very difficult time blaming abc for this. don't give a security interest in your house to secure a business loan and none of this happens.
So just give people money and walk away and hope for the best? I don't get that...Sometimes you have to hold someone's hand and not just point them in the direction...I admit, I've only seen bits of a show or two but most on the show are in hardship situations and typically, they don't have the intelligence, for lack of a better word, to handle a windfall like this...
What would you suggest?? This is silly...you build someone a house and give them loads of dough to get out of the mess they're in....and when they screw it up, it's your fault?? Please! Without them, they still would have been in the same crappy mess they were in before. You have to try...but you can't guarantee outcomes for people...people will make their own decisions, ultimately. People will screw up. Be generous, anyway. But don't pretend for one second this is ABC's fault. That's beyond silly.
Not just you. I don't watch 'Extreme Makeover'. Do the families watch the work? I wonder if they thought 'hey we could do this too and get a tv show!'
What's to handle? It's a house. You live in it. They had a house before. I'm sure they understand the concept that if you don't pay the bills, they come and kick you out of the house. Even a renter can get that. If they can't understand a concept that simple, they probably need to be institutionalized anyway. I would get it if they simply had too much home and couldn't afford it (there have been other families on the show who apparently couldn't afford the taxes or utilities), but these people chose to make a bet, and they quickly lost.
The families go on a week-long vacation while the house is built. All expenses paid. They get to see random updates from time to time while on vacation.
and in this situation it wasn't even about managing the house. it wasn't about not paying utilities or taxes on appreciated property.....IT WAS ABOUT COLLATERALIZING A BUSINESS LOAN WITH THEIR HOME!! How would anyone in ABC's position plan for that? "Oh, yeah..don't give away your home." These people needed business training....not home management training.
