Money & Financing
Can I use home equity?
Yes, but understand the trade-off before pledging your house.
Practical Explanation
Many buyers tap a HELOC or home-equity loan for part of their down payment. SBA lenders may also place a lien on home equity above a certain threshold as additional collateral. This works — but it ties your home to the business's performance.
Real-World Example
A buyer with $120,000 of home equity pulls a $60,000 HELOC to fund the SBA equity injection on a $600,000 acquisition.
Typical cash required
Whatever your equity position supports — usually up to 80% combined loan-to-value.
Experience required
Same as the underlying acquisition loan.
Advantages
- ✓Unlocks otherwise illiquid wealth
- ✓HELOC rates often lower than other financing
Risks
- !Your home secures the business loan
- !Variable HELOC rates can spike
- !Job + business + home are now correlated
Frequently Asked Questions
Will the SBA require a lien on my house?
If you have 25%+ equity in your primary residence, expect a lien as additional collateral on a 7(a) acquisition loan.
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