Home Equity as Collateral

By using home equity—likely their most valuable asset—as collateral, potential franchisees could be much more likely to receive bank financing in the form of a bank loan or SBA loan.

Using home equity may allow borrowers to maximize the amount of money they are able to borrow on a business loan. Although a business loan is usually be more expensive than a second mortgage or HELOC, it can help secure credit for the new franchise.

Generally, people use home equity when they need money for a big-ticket purchase. Home equity can be a good way to get access to the capital necessary to invest in a franchise. The amount that can be borrowed when home equity is used as collateral varies based on credit history, income, the amount of available equity and the percentage of available equity a lender is willing to lend.