Utilizing Home Equity for Small Business Funding: A Rising Trend

Palo Alto, CA, October 22, 2025 — In a challenging lending landscape, small business owners are increasingly navigating financial strain by tapping into home equity for startup funding. A recent analysis by Point, a foremost home equity investment platform, emphasizes this shift as traditional lending options tighten for a historic 13 consecutive quarters.

The Shifting Landscape of Small Business Lending

The Federal Reserve’s Senior Loan Officer Opinion Survey (SLOOS) has revealed stringent bank lending standards for small businesses, a trend that has persisted longer than at any time since the Great Recession. Coupled with new policy changes anticipated from the Small Business Administration (SBA), which may create additional challenges for prospective borrowers, small business founders are exploring unconventional funding avenues.

A Voice for the Underserved

“Microbusinesses,” typically defined as those employing fewer than 10 staff members, are particularly vulnerable to traditional lending exclusions. Aaron Terrazas, Point’s economist, notes, “Even during favorable economic climates, entrepreneurs often depend on personal assets or savings to launch their businesses. Home equity serves as an essential financial resource for those needing more capital than a credit card can provide but are unwilling or unable to take on a conventional business loan.”

Home Equity: A Vital Funding Resource

According to the Census Bureau’s 2022 Annual Business Survey, approximately 10% of small businesses utilize personal assets and another 10% rely on personal credit cards to initiate their ventures. Surprisingly, one in 16 small businesses taps into home equity for funding, outpacing the one in 50 that opts for government loans.

Point’s findings further reveal that inquiries about Home Equity Investments (HEIs) for small business purposes nearly doubled from 3.8% in Q1 2019 to an impressive 7.0% by Q3 2025. The increased interest in home equity as a funding source aligns closely with periods of tightened bank lending, underlining its role as a critical financial lifeline for entrepreneurs.

Regional Insights and Emerging Hotspots

While traditionally larger states like California, Florida, New York, and North Carolina dominate HEI inquiries related to small business investment, Virginia and the District of Columbia have noted the most significant growth. In Virginia, the percentage of HEI inquiries associated with small businesses surged from 5.3% in 2023 to 11.5% in 2025. Similarly, the D.C. region experienced an increase from 5.0% to 10.8%, a trend likely fueled by recently displaced federal employees venturing into entrepreneurship.

Addressing the “Missing Middle” of Business Financing

Point’s research underscores a significant gap between personal credit options and formal business lending. For instance, the average SBA 7(a) loan in FY2025 hit approximately $470,267, while the average HEI inquiry for small business investment stood at $116,575—99% of which were below the SBA threshold.

Terrazas comments, “Home Equity Investments empower small business owners to access capital on their terms, enabling them to invest in their ideas and communities during challenging financial periods.”

Common Uses for Home Equity Investment (HEI) Funding

Point’s data highlights the top sectors where entrepreneurs are deploying HEI funds:

• Food Service (37%): Inclusive of food trucks, bakeries, coffee shops, and catering services.
• Construction and Home Services (28%)
• Professional Services (13%)
• Transportation (10%)
• Personal Care (7%)

Conclusion

With small business lending conditions likely to remain challenging, home equity presents a viable alternative for entrepreneurs seeking capital. As more individuals turn to this unique funding source, they not only propel personal ambitions but also contribute to their communities.

For more detailed insights and further information, visit Point’s official website.

About Point

Point is a leading platform in the home equity investment arena, primarily focused on making homeownership more accessible and beneficial. Its flagship product, the Home Equity Investment (HEI), allows homeowners to unlock their equity without increasing their monthly expenses. Since its establishment in 2015, Point has assisted over 15,000 homeowners in accessing more than $1.5 billion in home equity. The company has garnered the support of notable investors and is headquartered in Palo Alto, California.

For inquiries, contact Amanda Woolley at 360-319-1738 or via email at awoolley@point.com.

This article provides a comprehensive overview of the emerging trend of home equity as a source of funding for small businesses and underscores the growing challenges in traditional financing avenues.