Falling house prices effects entrepreneurial opportunities

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As the population struggles to come to terms with the property price button having been reset, little thought is spared for those that rely on their home for both personal residence and security on the business.

For a number of small businesses across America however, it's fair to say that dropping home values crunch credit lines.

As the value of peoples' homes fall, home equity credit lines are disappearing with them. As a source of quick, safe cash for a number of entrepreneurs across the country, this loss of financial support is potentially catastrophic.

Blackwell's Organic Gelato, founded by husband and wife team Tom and Marcia Blackwell in 2005, was started on a home equity line of credit (HELOC), according to CNN Money.

The money arrived fast and effortlessly, with Marcia particularly pleased with lack of scrutiny the couple faced from the Small business Administration. Indeed, she hailed the credit a "smart business decision".

Marcia used the HELOC for everything, from ingredients to rent for a commercial kitchen. She was totally dependant upon the line of credit she was receiving.

Just as things were beginning to look up for the couple however, they received a call from their bank to say that the HELOC the couple had come to depend so heavily on was, like the gelato they produce, to be frozen.

The bank was concerned at the 30 per cent devaluation of the couple's home. The fact that the Tom and Marcia had not missed a single repayment was irrelevant.

Suddenly, things had to change. Never a frivolous spender, Marcia had to find ways of cutting back costs even further.

She stopped keeping stock, instead asking distributors of her and her husband's product to give advance notice of large orders.

Marcia said: "We have stopped all unnecessary spending; we cut out any marketing and advertising." Marcia no longer pays herself a wage either.

Where Blackwell's Organic Gelato has been able to cut back on costs however, many other businesses my not have been able to.

For those that depend on the HELOC totally and without compromise will have suffered greatly as a result of the housing market fall and potentially to the point where continued survival is impossible.

Indeed, the Housing Opportunities Collaborative (HOC), a non-profit organisation that offers help and advice to homeowners, suggests that 15 to 20 per cent of its visitors are small business owners in or approaching a home-related financial crisis.

Vino Pajanor, president of HOC, said of people that have their HELOC frozen: "If they can't run the business, they can't make money to pay the mortgage, and it becomes a viscous cycle."

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