Many business owners search for a Commercial Equity Line of Credit (CELOC) to access flexible funding for their properties. The challenge is, most banks no longer offer CELOCs — they’ve been replaced by faster, easier options like unsecured business lines of credit that don’t require you to pledge property as collateral.
At eFunder Capital, we help business owners and real estate investors qualify for unsecured lines of credit that work just like a CELOC — giving you revolving access to funds without the red tape or risk.
If you came here looking for a CELOC, this guide will show you how business lines of credit fill the same need (and often perform even better).
This approach — using a revolving business line of credit — can be a game changer compared to traditional business loans with stricter terms. In this guide, we’ll explain why banks moved away from CELOCs, how unsecured business lines of credit work, who qualifies, and the simple steps to apply.
What is a commercial equity line of credit?
⚠️ Important: CELOCs were once a popular option for business funding, but today most banks have discontinued them. The modern alternative is an unsecured business line of credit — it works the same way but doesn’t require property as collateral.
A Commercial Equity Line of Credit (CELOC) is a revolving loan that uses your commercial property as collateral. It works much like a home equity line of credit but is for business properties. With a CELOC, you can borrow funds up to a certain limit, repay them, and borrow again as needed.
Let’s say you own a retail space, and your business is booming. You want to lease the unit next door but don’t have the cash for the down payment and renovation costs.
A Commercial Equity Line Of Credit would bridge that gap by providing access to the necessary funds. This allows you to preserve your working capital. This flexibility makes a CELOC an excellent tool for managing business growth.
How Does a Commercial Equity Line Of Credit Work?
A Commercial Equity Loan or Commercial Equity Line of Credit (CELOC) lets businesses borrow against the equity in their commercial property. Just like a homeowner uses a HELOC, it essentially uses the property as collateral.
Think of a CELOC like a giant credit card, backed by commercial real estate. Once approved, you’ll get a predetermined credit limit that you can withdraw from as needed. You only pay interest on the portion of funds you borrow, which can help with cash flow and minimize overall interest expenses.
Let’s say your CELOC offers a $100,000 limit. You only need $20,000 for some new equipment, so you withdraw just that amount. You’re only paying interest on the $20,000, not the full $100,000, which is beneficial to managing your business credit.
Commercial Equity in CELOC
A Commercial Equity Line Of Credit can unlock the hidden value within your property. To determine the value, also known as your equity, lenders typically use a simple formula. They subtract any outstanding mortgages or loans secured by the property from its current market value.
The difference is your equity. For instance, imagine you own an office building valued at $500,000, and your outstanding mortgage is $300,000. Your equity would be $200,000.
What Types of Properties Qualify as Collateral for a CELOC?
Generally, you can use various commercial properties. These include office buildings, retail spaces, and warehouses.
Multi-family properties like apartment buildings also qualify. Mixed-use properties, which combine commercial and residential spaces, are eligible too.
Even industrial properties can be used. The key is that the property must have sufficient equity. Lenders will evaluate this before approval.
By understanding the property types that qualify, you can better prepare for your CELOC application. This knowledge helps you leverage your assets effectively.
Advantages and Disadvantages of CELOC
Before deciding if CELOC is right for you, it’s crucial to weigh its benefits and drawbacks to make informed decisions. Here’s a closer look at both:
While CELOCs have some clear benefits, they also come with major limitations — especially if you don’t want to use your property as collateral. Let’s compare the pros and cons, and then look at how unsecured lines of credit can offer a simpler path.
💡 If you’d like to see how much funding you could qualify for without using real estate as collateral, schedule a free consultation
Is a Commercial Equity Line Of Credit Right for Your Business?
If you were considering a CELOC, the better question today is whether a business line of credit is right for your situation. The answer depends on your goals, cash flow, and how you plan to use revolving capital.
Analyze your current cash flow, project future expenses and income, and carefully weigh the benefits against potential risks. Additionally, understanding commercial equity and how lenders determine the credit limit is an important step. If you prefer not to pledge property as collateral, a business line of credit is usually the best fit.
FAQs about Commercial Equity Line Of Credit
What is the commercial equivalent of a HELOC?
A commercial equity line of credit (CELOC) is similar to a home equity line of credit (HELOC). However, it is specifically designed for commercial properties. They both provide a revolving line of credit to business owners.
What is commercial equity?
Commercial equity is the market value of a commercial property minus any outstanding debts. If a business owns a commercial property, their commercial equity is the portion of the property they truly “own.”
What is the difference between a line of credit and an equity line of credit?
The biggest difference is that a line of credit may be unsecured. This means it’s not tied to any specific asset as collateral. In contrast, an equity line of credit is secured by a specific asset like real estate.
An unsecured line of credit often comes with higher interest rates. It might also be harder to get approved for because there is more risk for the lender.
Conclusion
A Commercial Equity Line of Credit (CELOC) can sound appealing — but it’s nearly impossible to find in today’s market. The good news is, the same flexibility and funding power are available through unsecured business lines of credit that don’t require real estate as collateral.
If you were researching CELOCs, what you actually need is a business line of credit — a revolving credit solution designed for business owners who need working capital without risking property.
👉 Learn more or apply for a business line of credit through our lending network.
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