Fuel Your Business Dreams with a Home Equity Sharing Agreement

Canadians are highly interested in starting their own businesses, but the country remains in what the Canadian Federation of Independent Business calls an “entrepreneurial drought”.¹

Entrepreneurship aspirations have reached an “eight-year high”, according to an RBC poll, with six in 10 Canadians expressing interest in owning a business.² Another survey earlier this year by Ownr found nearly one in two planned to start one in the next year.³ Still, more businesses have shut down than launched for six consecutive quarters, according to the CFIB.⁴

When it comes to launching, start-up funding is often one of the biggest hurdles for prospective business owners to clear. Many don’t have liquid savings, and typical business loans often require a 100% guarantee from business owners that they’ll pay back the loan or line of credit. That can make it challenging for new owners and those without a high net worth to qualify for financing. Entrepreneurs also often have to contend with how to pay themselves in the initial start-up phase, when the business has little or fluctuating revenue.

Whichever path you take to entrepreneurship, a Home Equity Sharing Agreement (HESA) from Clay Financial can be a practical and efficient way to fund startup costs without taking on debt or diluting the equity in your business, or as a complement to other funding sources.

3 Ways to Become a Business Owner in Canada (and What They Cost)

Launch a New Business

Your startup costs will vary depending on the type of business you’re launching, whether it’s a dental practice, a high-tech startup, a bookstore, a plumbing company or a solopreneur service business. They’ll likely include:

• Fees for business registration and incorporation 
• Business liability and/or cyber insurance
• Capital costs like equipment, tools, and/or vehicles
• Working capital for supplies and/or inventory 
• Labour costs
• Several months’ worth of rent costs for an office or storefront

Starting small as a solopreneur, or hiring contractors rather than employees, can keep costs lower in the early days.

Buy into a Franchise

Franchising lowers some of the risks associated with starting a business, thanks to the support you receive from the franchising company. But it can also come with some hefty up-front expenses.

Your initial investment can range from less than $10,000 and as high as more than $1 million,⁵ depending on how capital-intense the franchise’s business is. That amount includes:

• The franchise fee, which gives you the right to use the franchisor company’s name and branding, and also covers initial training, onboarding and other support with launching
• Working capital 
• Equipment
• Vehicles
• Lease for commercial space 

The average Canadian franchise fee is $25,000, and average initial investment is between $150,000 and $200,000.⁶ Service and home-based businesses are less expensive than businesses like restaurants or fast-food chains.

Acquire an Existing Business

More Canadians are looking to entrepreneurship through acquisition (ETA) as a less risky path to entrepreneurship than starting from scratch. Roughly $2 trillion worth of Canadian small- and medium-sized business assets will change hands over the next decade as existing owners retire. But fewer than 10% of small business owners have a succession plan in place.⁷

In addition to the transaction cost, buyers might need to hire a business broker to help them find and value a business, and a lawyer to complete the purchase and provide tax advice.

Traditional Business Financing Options—and Where They Fall Short

It can be overwhelming to think about these start-up costs and where the money will come from.

Personal Savings & Assets: Three in four Canadian small and medium business owners rely on personal funds,⁸ such as by tapping into savings or selling assets. Demonstrating a personal stake in your business can be appealing to potential investors later. But if you’ve used most of your savings, it introduces the risk of a cash-flow crunch in a slow month or when unexpected expenses hit.

Home Equity Lines of Credit (HELOCs): Borrowing from a HELOC can be an appealing option if your household budget is able to absorb a new monthly payment. A HELOC gives you more flexibility to pay down the debt on a longer timeline, at a lower interest rate than a traditional loan. But financial institutions typically require two years of proven and consistent income to underwrite a new loan or line of credit, or to approve a limit increase. That’s an immediate obstacle for entrepreneurs who’ve already left a corporate job, even if they have plenty of equity in their home.  For those with a HELOC already in place, drawing down on it introduces a monthly payment at a time that your income might be variable, which can create financial stress.

External investors: Bringing in outside investment, such as from angel investors, friends and family, or venture capital firms, can give you a longer runway to get up and running, but involves diluting your ownership stake in your company. Additionally, outside investment may be limited for your type of business, as venture capital and private equity investors look for specific high-growth opportunities.

Traditional Business Loans: Lenders usually demand personal guarantees and strict revenue history, adding personal liability and monthly debt service pressure when revenue is unpredictable.

Government Grants & Loans: Federal and provincial governments have loan and grant programs for new business owners and franchisees, such as the Canadian Small Business Financing Program. The government-backed loan guarantee program allows businesses with annual gross revenues of up to $10 million to access loans at a lower interest rate than traditional loans. Grants are also available for businesses in certain sectors or regions.

Use a Home Equity Sharing Agreement (HESA) to Fund Your Business

Whether you’re starting a business from scratch, standing up a new franchise or taking over an existing enterprise, the first few months or years as a business owner can be an uncertain time. Having the financial buffer to invest in the business, and to be able to pay yourself through those early days, is crucial.

A Home Equity Sharing Agreement from Clay Financial can be a powerful alternative to traditional business funding sources for entrepreneurs unable or unwilling to borrow or liquidate assets.

How it works, simply, is we become a partner in your home equity. Through a HESA, you can access up to 17.5% of your home’s appraised value, up to a maximum of $500,000, as a tax-free, lump-sum payment (minus our origination fee, and the costs for an independent appraisal and home inspection). 

In exchange, we’ll share in your home’s future appreciation or depreciation. If the value of your home increases, your payment at the end of the HESA will increase alongside it, while you still benefit from the overall gain in your home’s total value. If the value of your home has declined when you sell, your final payment could actually be less than the amount you initially received.⁹ A HESA can last as long as 25 years, but you can end it sooner if you choose to sell your home (anytime) or buy out the agreement without selling your home (anytime after the first 5 years).

With a HESA, there are no monthly payments to manage, and no interest accumulates since it’s not debt. While we’re acting as an investor in your home, the agreement is structured so that our investment will never touch the equity you’ve already built. That’s because we share in the future appreciation of your home. And our investment also protects your ownership of your business — you don’t have to dilute your stake in the company you’re building with outside capital if you don’t want to.

How a HESA Works for Canadian Business Owners: 3 Case Studies

To get a sense of how the HESA can work in practice, consider how it can help a few types of aspiring business owners achieve their entrepreneurship dreams.

1. The Independent Business Owner

The goal: A yoga instructor is ready to launch her own studio after years spent working for others. 

The hurdle: She’s built a business plan estimating her start-up costs at between $30,000 and $35,000, including the first year of rent on a new studio space, business registration and incorporation costs, professional and general liability insurance, equipment and furniture expenses, and hiring a couple of yoga instructors on a per-class basis. She also wants a buffer of $15,000 for surprise expenses and to be able to pay herself in slow months. She has an investment portfolio in a registered retirement savings plan, but it would just barely cover the costs. 

The HESA solution: With $50,000 from a HESA on her condo, she can keep her money in the market and avoid a tax event and a permanent loss of RRSP contribution room. She can also set aside the buffer funds in a high-interest savings account to grow until she needs them.

2. The Franchisee

The goal: An entrepreneurially-minded 40-year-old decides to leave the corporate world and become a franchisee of a national moving company. 

The hurdle: The initial investment required is $300,000, which covers a $50,000 franchise fee, working capital, truck leasing or financing, hiring and the lease on a small office. He considered a government-backed loan, but the monthly payments would stretch his current budget. 

The HESA solution: By using a HESA, he could access that amount as a tax-free lump sum to cover the business set-up costs without monthly debt payments.

3. The Tech Startup Founder

The goal: After years of working in the tech sector, a computer scientist is launching an artificial intelligence startup with two co-founders. 

The hurdle: They’ve received $800,000 from friends and family, and are each chipping in $150,000 towards building their product, marketing to prospective customers and working capital. She has savings that could cover her share, but is nervous about drawing on them and having little leftover to support herself in the company’s first few months.

The HESA solution: Pulling this amount from a HESA allows the founder to leave her personal savings untouched, giving her a financial buffer when the business isn’t generating income. By allowing the founder to raise less external capital, the HESA acts as a form of non-dilutive funding for the company.

Invested in Your Entrepreneurial Success

A HESA can be a great fit if you’re looking to start a business. It offers the financial flexibility required for startup costs, buying you time and breathing room while your revenue builds.

If you don’t feel able to rely on your savings or investments, aren’t willing to take on an additional monthly debt payment, and want to preserve your full ownership of your future business, a HESA could be the right fit for you. 

To see how much equity might be available to you, get a no-obligation estimate from Clay Financial today.

1. See “Canada’s Entrepreneurial Drought” report by the Canadian Federation of Independent Business (2026) ↩︎
2. See RBC’s Small Business Poll (2025). ↩︎
3. See Ownr’s 2026 Entrepreneurial Outlook. ↩︎
4. Based on analysis by CFIB; see footnote 1 above. ↩︎
5. Based on investment ranges provided by the Canadian Franchise Association. ↩︎
6. Based on Canadian franchise statistics provided by Franchise 101. ↩︎
7. See “Succession Tsunami” report by the Canadian Federation of Independent Business (2023). ↩︎
8. Based on business financing data from Statistics Canada (2020). ↩︎
9. You can sell your home at any time during your HESA. We share in the depreciation of your home if you sell your home anytime after the initial five years of our agreement. Learn more on our website. ↩︎