A commercial HELOC (or business-purpose HELOC) uses equity in commercial or residential real estate as collateral to provide a revolving line of credit for business purposes. Business-purpose HELOCs secured by the owner's primary residence are subject to CFPB TILA rules (Regulation Z) and state usury laws. See cfpb.gov/rules-policy/final-rules and fdic.gov for lender guidance.
A commercial HELOC is a revolving line of credit secured by a lien on real property — either commercial real estate owned by the business or residential real estate (the owner's personal home) when the loan's primary purpose is business. The distinction between a personal HELOC and a commercial HELOC turns on the loan's purpose, which has significant regulatory implications. Residential collateral, business purpose: When a business owner borrows against their home's equity specifically for business investment, the transaction may qualify as a 'business purpose' loan exempt from some consumer protection regulations. Under Regulation Z (12 CFR § 1026), loans primarily for business or commercial purposes are exempt from TILA disclosure requirements — but only if the primary purpose is business, not personal. Lenders document this through purpose statements (12 CFR § 1026.3(a)). Commercial real estate collateral (true commercial HELOC): When the collateral is a commercial property (office building, warehouse, rental property owned by the business), the HELOC is clearly a commercial instrument — not subject to residential TILA rules. These are underwritten based on commercial property value, NOI (net operating income), and the business's cash flow. Typical advance rates: 70-80% combined LTV (first mortgage + HELOC combined). Rates: prime rate + 0-200 bps depending on credit quality. CFPB oversight: The CFPB regulates residential HELOCs (including those made for business purposes secured by primary residence) under TILA/Regulation Z and RESPA. CFPB's supervisory guidance at cfpb.gov addresses lender HELOC origination and servicing practices. The FDIC examines bank HELOC portfolios for credit quality and compliance with TILA and home equity lending safety and soundness standards. SBA context: A business owner using home equity to inject capital into a business may find SBA lenders more receptive — home equity injections as borrower equity contribution toward SBA loan equity injection requirements are well-established. SBA SOP 50 10 permits home equity as an eligible equity source for SBA 7(a) and 504 loans. See sba.gov/document/support--sba-sop-50-10.
It depends on the primary purpose. A HELOC secured by a primary residence and used primarily for business is eligible for a TILA exemption (Regulation Z, 12 CFR § 1026.3(a)) — but the lender must document that the primary purpose is business. If the HELOC has mixed personal/business use, the primary purpose test applies. Consumer protections (right of rescission, TILA disclosures) apply when the primary purpose is personal. See cfpb.gov for CFPB guidance on TILA exemptions.
Most commercial lenders offer up to 70-80% combined loan-to-value (CLTV) for commercial property HELOCs — meaning the sum of all outstanding loans (first mortgage + HELOC) cannot exceed 70-80% of appraised commercial property value. LTV standards are tighter for commercial than residential because commercial properties are less liquid and more cyclically volatile. FDIC safety and soundness standards for real estate lending set supervisory LTV limits (FDIC Part 365) that banks must follow.
Business interest expense on a HELOC used for business purposes is generally deductible under IRC Section 163 as a business expense, not subject to the personal home mortgage interest deduction limits (which capped residential HELOC deductibility after the 2017 Tax Cuts and Jobs Act). If the HELOC proceeds are used for a mix of personal and business purposes, only the business-allocated portion is deductible as a business expense. See irs.gov/pub/irs-pdf/p535.pdf (IRS Publication 535) for business deduction rules.