This article explains essential considerations for securing business equity loans, including how property value influences borrowing capacity, types of loans available, and risks involved. It highlights the importance of assessing financial stability before opting for equity-based financing to ensure responsible borrowing and property security.

Leveraging property equity to obtain financing is becoming increasingly popular, offering benefits such as tax advantages and lower interest rates compared to credit cards. The amount you can borrow depends on the loan-to-value (LTV) ratio, which considers your property's appraised worth, outstanding mortgage balance, and equity stake. For example, with a property valued at US$300,000 and a mortgage of US$200,000, your equity is US$100,000, which can serve as collateral for a loan.

This funding can support business growth, home improvements, or urgent expenses. Typically, when the LTV reaches 75% or more, approval chances increase. There are two main types of equity loans: a fixed home equity loan and a Home Equity Line of Credit (HELOC). The former provides a lump sum, while the latter offers a flexible credit limit with interest only on borrowed amounts. Choose based on your repayment needs but be mindful that failure to repay risks your property. Carefully evaluate your financial situation before applying, as these loans are liabilities until fully paid off.