Before you use your home equity or savings

Home equity and savings can be more useful as collateral for a loan than if you spend it directly. If you have $20,000, it can be used as 20% collateral on a $100,000 loan - giving you 5 times as much funding.

Watch out, however. If your business fails, you will owe the full $100,000.

Regardless of whether you use the funds directly or as collateral, it is important to have a plan that clearly shows that you can breakeven and pay back any loans.