Core Insights - Small business lending has tightened for 13 consecutive quarters, leading entrepreneurs to increasingly rely on home equity for startup funding [1][2] Lending Environment - Bank lending standards for small firms have tightened longer than any period since the Great Recession, with policy changes at the Small Business Administration expected to create additional challenges for small business borrowers [2] Home Equity as a Funding Source - Home equity is becoming a critical funding source for small businesses, with 10% of small businesses using personal assets and another 10% using personal credit cards for funding; one in 16 small businesses utilizes home equity, which is more common than government loans [4] - The share of Home Equity Investment (HEI) inquiries for small business investment has nearly doubled from 3.8% in Q1 2019 to 7.0% in Q3 2025, indicating its role as a financial lifeline during credit contractions [5] Regional Trends - Large states like California, Florida, New York, and North Carolina account for half of all HEI small business investment inquiries, while Virginia and D.C. have seen the fastest growth in HEI inquiries for small business use [6] Funding Gap - There is a significant funding gap between personal credit and formal business lending, with the average SBA 7(a) loan in FY2025 being $470,267 compared to an average HEI inquiry of $116,575, 98.9% of which were below the SBA average [7] Utilization of HEI Funds - Common uses for HEI funding among small business owners include food service (37%), construction and home services (28%), professional services (13%), transportation (10%), and personal care (7%) [9]