What to know about equity take-outs: Turning property into business growth

If your business owns property, you may be able to use its equity to your advantage. Find out whether an equity take-out makes sense for your business.

9-minute read

Published January 08, 2026

Sometimes the barrier to growth isn’t vision—it’s money. If most of your resources are tied up in a fixed asset like property, then opportunities to modernize operations, expand into new markets or acquire equipment can seem out of reach.

But if your business owns real estate, you may have more options than you think. An equity take-out allows you to access the value already built up in your commercial property and reinvest it strategically in your business, without giving up ownership or taking on outside investors.

“Equity take-out is simply a way to unlock value you’ve already created,” says Stuart Freeman, Manager, BDC Business Centre. “The key is using that value in a way that strengthens your business.”

You’ve built up equity, and you’re borrowing against it. The real question is how you apply that capital.

What is an equity take-out?

An equity take-out involves refinancing your commercial mortgage to withdraw a portion of the equity you’ve built over time. As your property increases in market value and the mortgage gets paid down, the difference between the two becomes available equity.

For example, if your property is worth $5 million and your remaining mortgage balance is $1.8 million, then you have $3.2 million in equity. Through an equity take-out, you could refinance your mortgage to $2.3 million and use the $500,000 difference to invest in your business.

The property remains yours. The major changes are a higher loan balance and updated financing structure. Because you’re borrowing more, your monthly payments will typically increase, unless the amortization period is lengthened as part of the new deal. Your lender will work with you to set terms that align with your cash flow and business plan.

“Conceptually, it’s straightforward,” Freeman explains. “You’ve built up equity, and you’re borrowing against it. The real question is how you apply that capital. That’s what determines whether the financing benefits your business.”

To note, an equity take-out is not the same as using your equity as collateral to obtain a new loan. In an equity take-out, you refinance your mortgage into a new, larger one. The new mortgage replaces the old one—so you still have just one loan.

Generally, the funds should support the business, not personal goals.

When an equity take-out makes strategic sense

An equity take-out works best when the funds support growth and long-term value creation. Business owners commonly use this type of financing to:

Expand operations
If you’re adding space, opening a new location or increasing production capacity, leveraging your equity can help you fund the upfront investment.
Buy equipment or technology
Major equipment and technology upgrades can be costly, and traditional equipment loans often come with shorter amortization periods. An equity take-out lets you use your building’s equity to access longer-term, stable financing that better matches the useful life of the asset.
Acquire another business
A strong cash position can help you move quickly when an acquisition opportunity arises. “Many deals fall through simply because buyers can’t act fast enough,” says Freeman. “Having capital ready can shorten negotiations and help you secure the transaction.”
Strengthen cash flow
Businesses with seasonal fluctuations or temporary slowdowns can use equity strategically to smooth cash flow without needing to rely on short-term, higher-interest options.
Support major transitions
Some owners nearing retirement leverage the equity in their building to support succession planning or ownership changes.
Preparing for sale
If a sale is on the horizon, an equity take-out can help owners reduce personal financial risk ahead of time. It’s a way to strengthen the balance sheet while keeping operations stable. It’s best to consult your accountant or financial advisor before proceeding.

While lenders may approve an equity take-out for certain personal purposes, they generally won’t do so if the funds are intended for high-risk or speculative investments—such as trading stocks, cryptocurrency or other volatile assets—or for activities unrelated to business growth.

“Generally, the funds should support the business, not personal goals,” says Freeman.

Benefits for entrepreneurs

Used well, an equity take-out can be a powerful way to increase your financial flexibility while maintaining full ownership because:

You keep control
There is no equity dilution, which happens when you bring in external investors.
You have flexible use of the funds
You can apply the cash across key priorities, like equipment, expansion, hiring, acquisition or working capital.
You may get better terms
Property-backed financing often allows longer amortization periods and more competitive interest rates, both of which can ease the impact on monthly cash flow.
You can consolidate debt
In some cases, refinancing allows you to simplify multiple loans into one structure that better supports your long-term goals.

Ask yourself whether the investment you’re making will generate a return that is higher than the cost of borrowing.

Example of an equity take-out

Suppose a mid-sized metal parts manufacturer has outgrown its production capacity. The company owns a 30,000-square-foot facility valued at $4.2 million, and it has $1.6 million remaining on its mortgage. Over the years, the owners have built up $2.6 million in equity, but most of their capital is tied up in the building.

To meet rising demand, the owners want to purchase new machinery, upgrade the building’s ventilation system and hire more workers. They calculate that this will cost about $450,000. But the company’s cash reserves won’t be enough to cover that amount without strain.

Working with a lender, the owners arrange an equity take-out, refinancing the mortgage to $2.05 million. The difference—about $450,000—provides them with the funds needed to modernize the production line.

Refinancing could see the company:

increase its output substantially
shorten lead times for clients
improve air quality and safety for employees
take on several new long-term contracts

The owners maintain full control of the business, with no need for outside investors. Because the owners ensured that the new mortgage would offer a longer amortization, the monthly payments are manageable and aligned with expected growth. Ultimately, unlocking the equity in the building allows the business to pursue opportunities that would have otherwise been out of reach.

Costs, risks and other considerations

In practical terms, the cost of an equity take-out is the additional interest you pay on the higher mortgage amount. Along with the higher monthly mortgage payments, you’ll pay more interest in total over the life of the loan. There may also be standard refinancing costs, such as appraisal, legal or administrative fees.

It’s still just one loan, though—albeit a bigger one. (Property equity can also be used as collateral for another loan, but that’s a different financing structure.)

Because an equity take-out means taking on a greater amount of debt, you should approach it with the same caution as any major financing decision. Your cash flow needs to comfortably support the higher monthly payments.

Remember too that these payments can be influenced by interest rates. If rates rise, so will your debt servicing costs. Ultimately, your business’s ability to service the loan determines how much you can borrow.

Weigh the pros and cons thoroughly, says Freeman. “Ask yourself whether the investment you’re making will generate a return that is higher than the cost of borrowing.”

Finally, ensure you have strategic clarity: this kind of financing is most effective when it’s tied to a clear, measurable business plan. You should know exactly how the debt you take on is going to create value.

How to prepare your application

To evaluate an equity take-out request, a lender will typically want to review:

your property’s market value and existing mortgage balance
your financial statements to assess profitability and stability
the business’s cash flow capacity to ensure it can support a higher debt load
your business plan and details about how the funds will be used
the business’s management strength, including its track record and projections

Having these ready shows you’ve thought through your strategy and will use the new debt deliberately, not reactively.

Be prepared for potential property appraisal surprises, says Freeman. A lender will require a current appraisal, and market conditions may affect how much equity is actually available.

In addition, make sure you understand any existing loan agreements with your primary bank. These can sometimes include clauses that limit your ability to take on additional debt without that lender’s approval. Freeman has seen cases where entrepreneurs signed such agreements without reading the fine print and realized belatedly that they were unable to refinance.

“Owners are sometimes surprised to discover that they signed a deal with restrictions that make refinancing difficult, or pledged long-term assets to secure short-term debt,” he says.

A strategic tool—not just a source of cash

Used carefully, an equity take-out can allow you to leverage the value you’ve built in a property to pursue growth, boost competitiveness and strengthen your business’s long-term resilience.

“When matched with a solid plan and stable cash flow, it can be transformative,” says Freeman. “It’s about putting your assets to work so they help drive your next stage of growth.”

Next step

Don’t own property? Many other types of financing are available to help you grow your business. A BDC advisor can help you choose what type or size of loan is best suited to your business and your goals. Find out more.