Sweat equity is a term used to describe the contribution made to a project by people who contribute their time and effort. The equity created in a company or some other asset as a direct result of hard work by the owner. It is the physical work that one puts into an asset that increases its value. It is also used to describe the value added to real estate by owners who make improvements by their own toil. The more labor applied and greater the resultant increase in value, the more sweat equity that has been used.