If you have equity built up in your home then one way you could capitalize your business is by extracting some or all of your home’s equity out in the form of cash.

This happens to be one of my favorite ways to self-finance a business venture. Using a refinance loan, home equity loan (HEL), home equity line of credit (HELOC), etc, you are able to pull equity out of your home at an interest rate that is a lot lower than what good businesses can make. You are able to pay off the loan over a long time, like 15 to 30 years, which helps keep the payments low on the loan. I think it is a great debt financing tool.

But Brian, by gambling my home’s equity in my business idea I face the possibility of being foreclosed on and losing my family’s home if things go bad and I can’t make the higher monthly payments.

Yeah, so what!

First, if you consider it a gamble then you probably shouldn’t be using this technique right now. You’d probably be better off bootstrapping with what you’ve got. Get the word gamble out of your mind! Business is not about gambling. It is about making calculated investments of resources. There is whole a lot more leverage available in real life business than your favorite casino game. That means that you can have a predictable amount of control over your business success. If you have built-up enough leverage towards succeeding then the choice to use your home’s equity, for your business, shifts from being a gamble to a smart decision.

Nothing is guaranteed, no matter how sure you are, so you could be foreclosed on and lose your home if your business doesn’t pan out. Your credit will be hurt badly and you & your family will have to downgrade your lifestyle. It all comes down to what your goals and priorities are. I am the type who will significantly sacrifice my lifestyle for my financial goals if I need to. If I had a solid place for extra capital to work then I’d have no problem risking my home, credit and lifestyle. If I don’t add available leverage, I know I am instantly giving up on opportunity to help realize my goals & dreams. That thought causes me pain.