Amid Tight Lending Conditions, Entrepreneurs Turn to Their Homes to Fund Small Business Ventures

Palo Alto, Calif. – October 22, 2025 — As small business lending continues to tighten for a record 13 consecutive quarters, entrepreneurs are increasingly turning to home equity as a source of startup funding, according to a new analysis from Point, a leading home equity investment platform.

Data from the Federal Reserve’s Senior Loan Officer Opinion Survey (SLOOS) shows that bank lending standards for small firms have now been tightening longer than at any point since the Great Recession. Meanwhile, policy changes at the Small Business Administration (SBA) are expected to add further headwinds for small business borrowers, even as interest rates begin to ease.

“Microbusinesses, those with fewer than 10 employees, often fall through the cracks of traditional lending programs,” said Aaron Terrazas, economist for Point. “Even in easier economic conditions, small business founders rely heavily on personal savings or assets to get off the ground. Home equity fills a critical funding gap for entrepreneurs who need more capital than a credit card provides, but who don’t qualify for or want the burden of a traditional business loan.”

Home equity: a critical funding source for small businesses

According to the Census Bureau’s 2022 Annual Business Survey, about 10% of small businesses use personal assets, and another 10% use personal credit cards to launch their ventures. One in 16 uses home equity, making it a more common funding source than government loans (used by one in 50 small businesses).

Point’s own data shows that the share of Home Equity Investment (HEI) inquiries citing small business investment has nearly doubled in the past six years, from 3.8% in Q1 2019 to 7.0% in Q3 2025. Interest in small business funding through HEIs is consistently higher when bank lending conditions tighten, underscoring the product’s role as a financial lifeline for entrepreneurs during credit contractions.

Regional growth and emerging hotspots

While large states such as California, Florida, New York, and North Carolina account for half of all HEI small business investment inquiries, Virginia and the District of Columbia have seen the fastest growth. In Virginia, the share of HEI inquiries citing small business use jumped from 5.3% in 2023 to 11.5% in 2025, while D.C. rose from 5.0% to 10.8%—a trend likely driven by recently laid-off federal workers pivoting into entrepreneurship.

The “missing middle” of small business finance

Point’s analysis highlights a funding gap between personal credit and formal business lending. The average SBA 7(a) loan in FY2025 was $470,267, compared to an average HEI inquiry of $116,575 for small business investment, 98.9% of which were below the SBA average.

“Home Equity Investments are helping small business owners access capital on their own terms,” Terrazas added. “These entrepreneurs are investing in themselves and their communities—often turning long-held ideas into viable businesses when traditional financing isn’t available.”

Top small business uses for HEI funding

Among Point customers using HEI funds for small business purposes, the most common categories include:

• Food service (37%) – food trucks, bakeries, coffee shops, and catering
• Construction and home services (28%)
• Professional services (13%)
• Transportation (10%)
• Personal care (7%)

Read the entire report here. 

About Point

Point is the leading home equity platform making homeownership more valuable and accessible. Point’s flagship product, the Home Equity Investment (HEI), empowers homeowners to unlock their equity to eliminate debt, get through periods of financial hardship, and diversify their wealth – without adding to their monthly expenses. Point has worked with more than 15,000 homeowners, unlocking more than $1.5 billion in home equity. Point’s HEI enables investors to access a previously untapped asset class – owner-occupied residential real estate. Founded in 2015 by Eddie Lim, Eoin Matthews, and Alex Rampell, Point is backed by top investors, including Westcap, Andreessen Horowitz, Ribbit Capital, Greylock Partners, Bloomberg Beta, Blue Owl Capital, Alpaca VC, and Prudential. The company is headquartered in Palo Alto, CA. For more information, please visit www.point.com