A business equity loan is a type of secured business loan. With it, you can use the equity in your home or commercial real estate as security against a business loan. This will give you access to lower interest rates. These loans are available for both established and new businesses.
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Like a secured loan, an equity loan will require you to put up property as security to take out the loan. This can include residential or commercial real estate. The difference between an average secured loan and an equity loan is that you don’t have to own the property outright. Instead, you can use the amount of equity you own in the property to secure the loan.
Unlike other business loans, equity loans are available to new businesses granted you submit a detailed business plan as part of your application.
Like home loans, business equity loans may offer various features. These can include variable and fixed rate loan options, redraw facilities and interest-only repayments.
As with a secured loan, you run the risk of losing your property if you default the loan.
Equity is the difference between your property's value and any debt you hold against it.
Most equity loans allow you to borrow up to 80% of your property’s value minus the debt you hold against it. If your residential property is worth $500,000, this means that you’ll be able to borrow $400,000 (i.e. 80% of the property’s value). If you’ve already paid off $300,000, you'll have $200,000 left on your mortgage. Once you subtract $400,000 with what you owe, you’ll be left with $200,000, which is the equity you can use against your property. To simplify:
You may need a property valuation to know exactly how much equity you have.
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If your business has outstanding invoices, invoice financing may be an option for you. It's a type of business loan that comes with reduced risk and no asset requirements or interest payments.
Compare the invoice financing products below.
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