Can You Use Home Equity to Start a Business?

Starting a business takes grit, vision – and funding. If you’re a homeowner with significant equity built up, you might be wondering: “Can I use my home equity to start a business?”.

The short answer is yes, you can. But just because you can doesn’t always mean you should. It also doesn’t mean that every method of tapping into home equity is equally suited for all entrepreneurs.

Let’s break down how home equity can be used for business funding, what options are available, and when it might make sense.

Yes – You Can Use Home Equity for Business Funding

Home equity is one of the most powerful financial tools available to homeowners. Whether you’ve paid down your mortgage over time, your home has appreciated in value, or both (!), the equity you’ve built can potentially be leveraged to fund a new venture.

But tapping into it requires careful planning. After all, you’re putting your home – potentially your most valuable asset – on the line.

Ways to Use Home Equity for Your Business

There are several ways to convert home equity into business capital. Here’s a high-level look at your options:

1. Home Equity Loan (HELOAN)

A home equity loan gives you a lump sum upfront and requires fixed monthly payments with interest. Best for: Entrepreneurs who want a predictable repayment plan and have clear capital needs (like equipment or inventory).

2. Home Equity Line of Credit (HELOC)

A HELOC works like a credit card secured by your home, offering flexibility to borrow as needed. Best for: Businesses with ongoing or uncertain expenses. Keep in mind payments can vary with fluctuating interest rates.

3. Cash-Out Refinance

This replaces your current mortgage with a new, larger one — and you pocket the difference. Best for: Homeowners who also want to lock in a new mortgage rate or consolidate other debts, while funding their business.

4. Equity Sharing Home Loan

With an equity sharing home loan, like those offered by Unison, you can access cash based on your home’s value, while making monthly payments that are typically much lower than traditional loans. The tradeoff for market-low rates is that you agree to share a portion of your home’s future appreciation.

Best for: Homeowners who want to minimize monthly financial pressure during the early stages of business ownership.

Why Business Owners Consider Home Equity

Using your home’s value to launch or grow a business can make sense, especially if:

• You don’t qualify for traditional small business loans

• You want to avoid taking on high-interest credit card debt

• You need fast access to flexible capital

• You’re confident in your business plan and cash flow projections

Considerations to Keep in Mind

Before you use your home to fund your business, consider the potential downsides:

• You’re putting your home on the line. If your business fails and you can’t repay the loan, foreclosure is a real risk.

• Equity is finite. Once you borrow against your home, that equity won’t be available for other goals – like retirement, college, or emergencies.

So… Should You Use Home Equity to Start a Business?

It depends on your financial situation, risk tolerance, and confidence in your business plan.

If you’re early in your entrepreneurial journey, a traditional small business loan can be hard to qualify for. Using your home equity could offer a faster, more accessible route. Among the options, equity sharing home loans stand out for offering lower monthly payments, helping to reduce the pressure during your business’s ramp-up phase. Want to learn more about how more traditional loans and home equity alternatives stack up? Check out our ESHL vs. Small Business Loan breakdown.

As always, it’s wise to consult with a financial advisor to make sure the trade-offs align with your long-term goals. But with the right strategy and support, your home could become more than just HQ for your small business. It could be the source of funding behind your next big move.

Disclaimer: This content is for informational and educational purposes only and does not constitute financial, legal, or lending advice. Loan terms and availability vary by lender and state. Consult a qualified financial professional or lender for personalized guidance tailored to your situation. 

Unison Mortgage Corp NMLS ID 2574289