A HELOC (home equity line of credit) is a revolving line of credit secured by the equity in your home. Buyers sometimes use one to fund the SBA equity injection, though lenders count the payment against you and it puts your house on the line.
Worked example
| Line | Amount |
|---|---|
| Purchase price | $1,000,000 |
| SBA required injection (10%) | $100,000 |
| HELOC draw to fund it | $100,000 |
| Added monthly HELOC payment | ~$900/mo |
The HELOC solves the cash problem but its payment reduces the cash flow left to cover the acquisition loan.
Why it matters when buying a business
A HELOC can be the difference between doing a deal and not, but it's a double loan. The SBA already requires a personal guarantee and may lien your home as collateral; a HELOC stacks more personal debt on top and trims your DSCR headroom. Compare it against a standby seller note or ROBS before you tap home equity.
