SBA Update – Using Homes as Collateral

Dateline February 19, 2026

If you are in the market for a Business Acquisition or Business Real Estate (owner occupied) loan, and have not been quoted a long-term Fixed Rate, you need to call Coffman Capital immediately!

But that’s not the purpose of this article – just a reminder!  The news is that SBA has changed how it views taking your primary residence as collateral – as long as you do not live in a state where they cannot use it for commercial loans – like Texas.

The old pre-COVID-era rule was basic: if the business being purchased or financed does not have collateral to cover the loan – which they usually do not, then the primary residence of the buyer/owner/guarantor is looked at as possible collateral.  The limit was general – if you had 25% equity in the home according to lender’s estimate, whether online appraisal or actual one – they were required to use the home, and file a lien in whatever position was available – 2nd or 3rd position, whatever.  Lenders would sometimes waive it for smaller loans, usually under $250,000.

During COVID, this was loosened so that lenders could waive it for loans less than $500,000 and we saw loan amounts reduced for that purpose only.  NOTE: The borrower could also take the house out of the collateral requirement by using a Home Equity Line (or Loan) aka HEL, by having it (almost) completed by time of application.  It counts against equity and lender could waive it if the HEL and primary mortgage reduced equity to below 25%.

SBA has updated it and lenders only have this discretion when the loan is $350,000 or less.  Lenders choose whether to use it or not at those smaller levels.  One recent story that a banker related was a borrower having an unused HEL and the underwriter chose to ask them to close it because they felt it necessary.  We of course would like to avoid that.  It’s one of the reasons you use Coffman Capital for financing – we have more than one lender’s guidelines for resources.

The HEL tool to reduce equity is still there – at lenders’ discretion as always and the potential payment counts as debt in qualifying.  The other interesting issue is ownership – who owns the home and is it still required?  That is a little detailed to put in this article and relates to things like spouse guarantors and the like.  Suffice for now to invite you to call us about your individual needs – we have all the tools at our disposal.

So if you’d like to find out how good the terms can really be for your loan, you need to call us ASAP!  We also excel at minimizing your cash injection.  If that’s something that interests you, we’re Ready to Help You!!

You can call Direct at 813-891-1811 ext 101.  If you’d like us to preview your request so we can be more helpful on the call, please complete our Loan Inquiry Form and we’ll get right back to you!  As always, no upfront fees – ever – and we’ll do our best to be the most competitive loan source for your project! 

Thanks for choosing Coffman Capital for your Practice and Business Financing!

We are Ready to Help You Succeed!!