Benefits of Equipment Financing vs. Home Equity Line of Credit

Don't regret using your home equity – see how equipment financing can grow your business without risking your personal assets!

By Beacon Funding| Jun 14, 2024| 1763 Views
Benefits of Equipment Financing vs. Home Equity Line of Credit

In early 2024, a survey by Secured Research revealed an intriguing finding after asking 1,600 small business owners who had been in business for more than five years. 52% of small businesses used the equity in their homes to meet their capital needs. What's shocking is that 96% of those business owners expressed profound regret in choosing that option to raise capital.

This startling figure highlights the severe dangers and psychological costs of using a Home Equity Line of Credit (HELOC) for business. It raises significant questions about why so many people regret this decision and what better alternatives could be.

Why do small business owners wish they chose a different course instead of using their home equity?

There are several reasons, but the main ones are the significant personal risks involved. Putting up your home as collateral adds intense psychological pressure of perhaps losing one's house.

Given this situation, it is critical to investigate safer, more targeted finance alternatives. Financing for corporate asset purchases is an option known as equipment financing. Business owners can fund their operations more wisely and regretfully if they know the advantages and disadvantages of HELOCs and equipment financing.

In this article...

  1. An Overview of a Personal HELOC
  2. Drawbacks of a HELOC
  3. Beacon Funding's Equipment Financing
  4. Get Financing Without Risking Your Personal Assets

An Overview of a Personal HELOC

As a business owner, you aspire to build your company for a profitable future. However, there's a catch: you need money quickly to acquire equipment.

A Home Equity Line of Credit (HELOC) is one option that may cross your mind to access the equity you have accumulated in your house. This looks like the perfect option at first – easy access to money, freedom to spend it whatever you want, and even possible tax advantages.

But before getting started, it's critical to comprehend all that a HELOC comprises, including the benefits and drawbacks.

What is a HELOC?

It is a revolving line of credit backed by the equity in your home. This loan uses your home as collateral. Equity is the difference between the market value of your home and the amount you still owe on your mortgage, and it determines how much you can borrow.

You can utilize HELOCs for several things, such as paying off other debts, making home modifications, or paying for business expenses.

Benefits of a HELOC

Some of the benefits are as follows:

Quick Access

Your ability to access funds quickly is one of the most significant benefits of owning a home equity loan. Getting money might be simple and quick if a person already has a HELOC. Prompt funding availability is crucial for companies seeking quick financing, whether to capitalize on unforeseen opportunities or meet urgent financial needs.

Suppose your company receives a sizable order that must be paid for immediately. In that case, a HELOC can give you the money you need without the usual waiting period associated with regular loan applications.


Flexibility is another crucial advantage of a HELOC. With a HELOC, you can use the money for various objectives, unlike many company loans with set uses.

A HELOC offers flexible financial help, whether you need to invest in a new marketing campaign, pay payroll during a sluggish month, or buy new equipment.

Small business owners who deal with various financial obligations and require a financing solution that can adjust to their varied needs may find this flexibility especially helpful.

Drawbacks of a HELOC

Following are some of the drawbacks:

Risk to Personal Assets

A HELOC's most significant disadvantage is the risk it poses to your assets, especially your house. Because a home equity line of credit is secured by it, defaulting on the loan could lead to foreclosure. This implies that you risk losing your house if your company experiences financial difficulties and you cannot make the HELOC payments.

When you use a HELOC, there is a real chance your house could be in danger if the business experiences financial difficulties. Business owners are effectively attaching their assets to the success of their enterprise when they utilize home equity as a source of funding.

Due to this danger, taking out a HELOC is a risky way to get money for your company, which is one of the main reasons many business owners regret their financing choice.

Variable Interest Rates

A home's value isn't fixed. The real estate market and economic cycles can significantly impact house values.

Variable interest rates are common with HELOCs, so your payments may change depending on the state of the market. The unpredictability of increased interest rates might make repayment obligations unpredictably heavier, which can complicate financial planning.

For instance, if interest rates rise dramatically, you must make considerably larger monthly payments than planned. This would increase your financial stress and possibly pressure your business's cash flow.

Additionally, consider the unpredictable nature of the real estate industry. Your home's value can fluctuate dramatically over time for reasons unknown to you, such as changes in the property market or an economic downturn. It could be worth a substantial sum one day. Due to this uncertainty, planning and obtaining the capital your company needs may be challenging, which could cause further stress and unstable finances.

Impact on Personal Credit

Using a home equity line of credit impacts your credit usage percentage. Excessive use of credit might hurt your credit score and, consequently, your future creditworthiness. This may restrict your future access to commercial or personal financing.

Combining personal credit issues and business challenges can create a double-edged sword, making it harder to recover from financial failures.

Emotional Stress

Another drawback of using a HELOC is the emotional cost of putting your house as security. An emotional weight that can overshadow any commercial achievement is the ongoing worry that one will lose one's home if the venture fails. Many people regret their first decision due to this stress, which may affect decision-making and general well-being.

Picture yourself worrying about finances, not only for your company but also for your house, causing restless nights. This kind of stress can have a severe negative impact on a person's overall quality of life and mental health. It's not only about the money, it's also about the peace of mind that comes from knowing your house is secure, regardless of how the company performs.

Although it might first seem handy, using home equity to finance a business can come with dangers, market instability, and emotional distress. Business owners should consider the potential lasting repercussions before utilizing their home equity.

Limited Amount

The amount you can borrow from HELOC depends on the equity in your property. This cap might not be enough for businesses needing significant funding, in which case other or additional financing sources would be required.

You may have to look for other forms of financing if your HELOC is insufficient to meet your needs, which would further exacerbate your financial circumstances.

HELOCs include a lot of hazards, not the least of which is the possibility of losing your house and the damage it may do to your credit. Even though they can provide rapid access to funds and flexibility in utilizing them, they are not without risk.

Business owners should consider these advantages and disadvantages carefully before funding their operations with a HELOC. Examining alternative finance choices, such as financing for equipment, may offer a more focused and secure method of addressing your company's demands.

Beacon Funding's Equipment Financing

In simple words, equipment financing is a loan or lease acquired to fund equipment specifically for your business -- whether you need a tow truck, skid steer for landscaping, septic pumper truck, screen-printing machine, or an embroidery machine.

With Beacon Funding's equipment financing, your business can spread out the cost of the expensive equipment cost over time without putting your personal assets at risk. Instead, you can build up business credit while financing it with an A+ rated lender.


Benefits of Equipment Financing

Equipment financing offers a lot of benefits to businesses.

Some of these are as follows:

Establish and Build Business Credit

Some business owners probably don’t see the benefits of building their business credit until it’s too late. According to the National Small Business Administration, nearly 27% of businesses claimed they couldn’t receive the funding they needed which prevented them from growing.

As your business builds credit over time, its reputation with lenders becomes stronger and more secure. This puts your business in a better position to acquire the assets it needs to grow and expand. If your company needs different pieces of equipment for different jobs, strong credit gives you the ability to get the right kind of equipment while keeping your personal credit separate from business expenses.

Preserve Working Capital:

By funding the equipment from an outside source, businesses can preserve the working capital operational costs and investments.

Minimal Upfront Costs

When the equipment is 100% financed, businesses may have to pay less than when financed via installments. Furthermore, it preserves cash flow, and businesses do not have to make a significant down payment.

Tax Benefits

In many cases, equipment financing offers tax benefits where interest costs may be deductible as business expenses.


Fixed interest rates and predictable/ customized repayment schedules help with financial planning and budgeting for a business. This flexibility can help allocate budget for investments, unforeseen expenses, and operational costs.

Get Financing Without Risking Your Personal Assets

Consider risking everything you've worked so hard to gather — including years of mortgage payoff and home equity. Don't risk it all and deal with the anxiety of the possibility of losing your house with a HELOC!

Instead, use the smart alternative of equipment financing. It's the solution that gets you funds fast and easily without using your home as collateral. With Beacon Funding, you get a financing partner that helps you establish and build up credit for your business.


Beacon Funding
Beacon Funding

P: 847.897.2499 |  EContact Me

Since 1990, small businesses nationwide have been able to grow with fast affordable equipment financing from Beacon Funding.