A cash-out refinance to fund a business lets you pull equity from your home as a lump sum without replacing your existing first-mortgage rate. Business owners can access $15,000 to $750,000 at up to 85% combined loan-to-value, with a credit score starting at 650 and funding in as few as five days. The core question is whether a lump sum or a revolving line better fits what you are actually trying to do.
Most owners we talk to know about the business-purpose HELOC. Fewer realize that a cash-out refi is a distinct instrument with different mechanics, and that depending on what you need the money for, one will clearly be a better fit than the other. This post breaks down the real difference.
What "cash-out refinance" means for business owners
In traditional mortgage lending, a cash-out refinance means replacing your existing first mortgage with a new, larger loan. You pocket the difference in cash. The problem: if today's rates are higher than your original rate, you lock in that higher rate on your entire remaining balance, often for 15 to 30 years.
That is not what we are talking about here.
The cash-out refi product we work with is structured as a second-lien instrument. Your existing first mortgage stays exactly as it is, with its original rate and payment. You access the equity above it as a separate product. Your low rate is untouched.
The Consumer Financial Protection Bureau notes that a key consideration in any cash-out transaction is how the new debt interacts with your existing obligations. (CFPB, What is a cash-out refinance?) The second-lien approach sidesteps the rate-replacement problem entirely.
Cash-out refi vs. HELOC: the real difference for business funding
Both products tap your home equity. Both are available through GrowthPath up to $750,000 at 85% CLTV. Here is where they split:
| Cash-Out Refi | Business-Purpose HELOC | |
|---|---|---|
| How funds arrive | Lump sum at closing | Revolving line: draw what you need |
| Best for | One defined, large purchase or payoff | Ongoing or variable capital needs |
| Debt consolidation | Can automatically roll in credit cards and personal loans at closing | Draw separately to pay off other debts |
| Redraw | Available up to 100% during draw period | Revolving: draw, repay, redraw up to 100% |
| Approval speed | Minutes | About 24 hours |
| Funding speed | As few as 5 days (up to $400K) | About 5 days after approval |
| Affects existing mortgage rate | No | No |
| Out-of-pocket costs | No. One-time origination fee only | No. One-time origination fee only |
If you are comparing equity products and the HELOC's revolving line is what you actually want, the VSL at heloc.growthpathadvisory.com/vsl walks through the full HELOC program and application in detail. If you have already decided a lump sum is the right structure for your situation, keep reading.
When a cash-out refi beats a HELOC for business funding
The cash-out refi wins in three clear situations.
You have a single, defined capital need. Buying equipment, putting a down payment on a commercial property, funding a lease buildout for a new location, or buying out a business partner. When you know the number and need it in one shot, a lump sum is cleaner than a revolving line. The HELOC's flexibility becomes an advantage only when you need to draw in stages.
You are carrying high-interest personal debt alongside the business need. The cash-out refi can automatically consolidate credit cards and personal loans into the new product at closing, combining everything into one payment. Instead of juggling a business draw plus three separate high-rate balances, you close with a single structure. The HELOC can do this too, but it requires separate manual draws to pay off each debt. The cash-out approach does it automatically.
You want speed. The cash-out refi prequal resolves in minutes, versus about 24 hours for the HELOC. On deals up to $400,000 where no in-person appraisal is needed, funding can land in as few as 5 days from application. If a business opportunity has a short window, faster prequal can matter.
When the HELOC is the better call
Being an honest advisor means saying this plainly: the HELOC wins when your capital needs are not defined yet.
If you are running a business with fluctuating inventory needs, project-based cash flow gaps, or growth that will unfold over 12 to 24 months, a revolving line you can draw on, repay, and draw from again is a fundamentally different tool. You pay interest only on what you draw. You are not servicing a large lump sum sitting idle while you figure out where to deploy it.
We have talked with plenty of owners who took a lump-sum product when a revolving line would have served them better. The reverse is also true. It comes down to whether your use of the funds is defined or open-ended.
You can read more about the full HELOC mechanics and the self-employed qualification path in our posts on business HELOC requirements and qualifying without tax returns if you are self-employed.
What you need to qualify for a cash-out refi for business
Qualification is property-first and bank-statement based. Here is what lenders actually look at:
- Credit score: 650 or higher on a primary residence. 680 or higher if the property is a second home or investment property.
- Home equity: Your existing mortgage plus the new cash-out amount cannot exceed 85% of the property's current value (85% CLTV). Example: a home worth $500,000 with a $280,000 remaining mortgage has $145,000 in accessible equity at 85% CLTV ($425,000 max debt minus the $280,000 balance).
- Active business bank account: Required. Revenue is reviewed but carries less weight than the property itself.
- Bank statements, not tax returns: Qualification is bank-statement based, not tax-return based. This is the same underwriting shortcut that makes the HELOC attractive to self-employed owners with aggressive write-offs.
- No minimum time in business on many programs. A newer business with a creditworthy owner and solid equity can qualify.
Prequalification is a soft credit pull with no impact to your score.
For real estate investors who want to access equity in an investment property rather than a primary residence, our bridge loans and the DSCR product line may also be worth reviewing, depending on the property type and whether cash flow from the property itself is a qualifying factor.
Does a cash-out refi give you 100% of your equity?
No. The 85% CLTV cap means you always keep a buffer. A lender will not let you borrow against every dollar of equity because that would leave no cushion if the property value dropped.
Here is how to calculate your accessible equity: multiply your home's current value by 0.85. Subtract your existing mortgage balance. The result is roughly what you can access, subject to final underwriting.
On a $600,000 home with a $350,000 balance: $600,000 x 0.85 = $510,000. $510,000 minus $350,000 = $160,000 accessible.
Loans above $400,000 may require an in-person appraisal, which adds a few days to the timeline. Below $400,000, a remote valuation is typically sufficient.
What is the 12-month seasoning rule, and does it apply here?
The 12-month rule is a Fannie Mae and Freddie Mac guideline for conventional first-lien cash-out refinances. It says you generally must have owned a property for at least 12 months before pulling cash out through a traditional mortgage refinance. This rule exists to prevent property flippers from inflating values and immediately cashing out.
It applies specifically to conventional first-lien refinances, not to second-lien equity products. Because GrowthPath's cash-out refi is a second-lien instrument that leaves your existing first mortgage in place, this seasoning requirement does not govern the same way. If you bought a property recently, closed on it, and have built equity, it is worth checking your specific situation rather than assuming you must wait a year. (Federal Reserve Z.1 data shows that aggregate homeowner equity in the U.S. has grown substantially over recent years, meaning many owners who bought even recently have more accessible equity than they realize.)
When you should NOT do a cash-out refi
This is money backed by your home. If you cannot service the new payment, you are putting your property at risk. Say that clearly to yourself before applying.
Do not use a cash-out refi to fund a business idea you have not yet validated. Do not use it to cover operating losses without addressing why the losses are happening. And do not use it to pay off an MCA or other high-interest debt unless you have a plan to avoid the same pattern again. (Our post on using home equity for business covers the honest risk calculus in more depth.)
Also: if you have a very low first-mortgage rate and are worried about losing it, make sure you understand the product you are getting. A second-lien instrument leaves your first mortgage entirely alone. A traditional first-lien cash-out refi replaces it. Understand which one you are signing before closing.
One more downside worth naming: interest on a cash-out refi used for business purposes is generally NOT tax deductible. The IRS applies this same rule to HELOCs and second mortgages when the funds are not used to buy, build, or substantially improve the property that secures the loan. Check with your CPA on your specific situation. (IRS Publication 936)
How much does a cash-out refi cost?
The GrowthPath cash-out refi carries a one-time origination fee and no out-of-pocket closing costs. There are no prepayment penalties.
This is very different from a traditional mortgage refinance. On a conventional first-lien refi, closing costs typically run 2% to 5% of the loan amount. On a $400,000 traditional refi, that is $8,000 to $20,000 out of pocket before you see a dollar. The second-lien equity structure avoids title searches, escrow, and the full closing process that makes traditional refis expensive.
The ideal borrower profile
Based on the files that actually close, the cash-out refi works cleanest when:
- The owner has a clear, defined use of funds (not "working capital someday")
- The property has meaningful equity, ideally $100,000 or more accessible after the CLTV cap
- Credit is 680 or above (not just the 650 minimum, which still qualifies but with less margin)
- Business bank statements show consistent deposits, even if revenue is seasonal
- The owner is not already over-leveraged: no active MCA stacking, no significant unpaid liens
If you have active MCA stacking on top of the business, the cash-out refi may still work, but the CLTV math needs to pencil clearly and you need a plan for what happens to cash flow once the MCAs are replaced. We have written separately about how to exit a merchant cash advance and what makes those files actually close.
Frequently asked questions
Can I use a cash-out refi to fund any type of business expense?
In most cases, yes. Inventory, equipment, a commercial real estate down payment, a lease buildout, acquiring a business, and working capital are all common uses. The lender underwrites the property and your ability to repay. They are generally not prescriptive about how you deploy the funds, as long as the stated purpose is business-related and the numbers support the payment.
What happens if my home's value has dropped since I bought it?
The lender uses a current valuation, not your purchase price. If your home's value has declined and your remaining mortgage balance now puts you near or above 85% CLTV, you may not have enough accessible equity to qualify. The prequalification process will show you exactly where you stand without affecting your credit score.
Can an LLC or corporation use a cash-out refi on a property owned personally?
The equity product is underwritten on the individual borrower and the property, not the business entity. As long as you own the property personally and meet the credit and equity requirements, the fact that funds will flow into or be used by a business entity is not typically a barrier. Discuss your specific structure with us at application.
Is a cash-out refi right for a real estate investor who owns multiple properties?
Possibly. If you want to tap equity in an investment property to fund a business or acquire another property, a second-lien equity product on that investment property follows the same 680+ credit requirement that applies to non-primary-residence collateral. If the property itself generates rental income and you want to qualify on that income rather than personal income, a DSCR loan is a separate path worth considering alongside the equity route.
If a lump sum from your home equity is what your situation calls for, the fastest way to find out what you qualify for is to start the application. Prequal is a soft pull and takes a few minutes.