Can I get a HELOC after I get my SBA loan approved?

August 05, 2024

by a searcher from University of Pennsylvania - The Wharton School in Miami, FL, USA

I'm using my home as collateral for my SBA loan and have been informed that I won't qualify for a HELOC after closing on the SBA loan. Is this true? Should I consider obtaining the HELOC before closing on the SBA loan?

Thanks!

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Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

If you have a collateral shortfall on your SBA 7A loan and you have 25% or more equity in your home, then the SBA will likely require you to pledge your home as additional collateral. That pledge will mean the SBA will put a mortgage or deed or trust (depending on your state law) on your home, which will take up the remaining equity in your home. Because of that you will not be able to get access to that equity via a home equity loan. If you want to have access to that equity, then I would recommend getting a home equity loan in place sooner, preferably before you apply for the SBA loan. If you have additional questions regarding the pledge of additional collateral for an SBA 7A loan you can reach me here or directly at redacted

Reply by a searcher
from Baylor University in Chicago, IL, USA

Yeah you must get the HELOC prior to applying for SBA. You will never regret doing it, Also, I'd recommend getting a new business card and new personal card that have 0% APR for the first###-###-#### months prior to applying for SBA. Then call the bank and have them raise your credit limits after a couple months. Not saying you need to use them or max them out irresponsibly, but trust me: when you actually need the cash you will not be able to get it. Stack options and your future self will thank you.

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