Owners Tap Equity to Start Businesses

August 14, 2017

Home owners are turning to home equity not just for home renovations but also to launch new businesses. Equity was used as a source of capital to launch 284,618 U.S. businesses—7.3 percent of all businesses, according to a newly released analysis by the U.S. Census Bureau that culls 2014 data.

According to the study, the industries that use home equity at some of the highest rates are accommodation and food services, other services, retail trade, and manufacturing. These industries tend to average $50,000 to $99,999 of funding for startup capital.

The analysis found that businesses owned by women are more likely than men to use home equity as a source of startup capital. Also, Asians, American Indian and Alaskan Natives, and Pacific Islanders or Hawaiians tend to leverage home equity at a higher rate than whites or blacks.

Still, even though African Americans statistically tend to have lower rates of homeownership compared to others, those who do own have a slightly above-average use of tapping home equity loans to start businesses, the analysis found.

“Equity in homes not only plays a significant role in providing capital to start U.S. businesses in general, it is especially important in helping women and racial minorities in the U.S. start new businesses,” the National Association of REALTORS® wrote about the study on its blog Eye on Housing.

Source: “Home Equity Used to Start Seven Percent of U.S. Businesses,” National Association of Home Builders’ Eye on Housing blog (Aug. 9, 2017)