The RBA’s liaison has highlighted that if small business borrowers are able to provide housing as collateral, it significantly reduces the cost and increases the availability of debt finance. Lenders have indicated that at least three-quarters of their small business lending is collateralised and they only have a limited appetite for unsecured lending.
However, there are a number of reasons why entrepreneurs find it difficult to provide sufficient collateral for business borrowing via home equity: they may actually not own a home, or have much equity in their home if they are relatively young; similarly, they may not have sufficient spare home equity if they’ve already borrowed against 11 / 17  BIS central bankers' speeches  their home to establish a business and now want to expand their business; and even if they have plenty of spare home equity, using their homes as collateral concentrates the risk they face in the event of the failure of the business.