{"ok":true,"canonical_url":"https://dealroom.so/glossary/disguised-debt","api_url":"https://dealroom.so/api/public/glossary/disguised-debt","data_freshness":{"sba_records_through":"2026-05-31","fdic_records_through":"2026-03-31","dealroom_last_updated":"2026-06-15","timezone":"America/Chicago"},"source_summary":["Public SBA 7(a) loan records","FDIC institution data","DealRoom lender and franchise enrichment"],"term":{"slug":"disguised-debt","term":"Disguised debt","group":"Your money in the deal","definition":"Money injected by the buyer or seller that looks like equity but functions like a loan, often with an expectation of repayment. The SBA scrutinizes this to ensure true equity injection and proper debt structuring.","what_it_means":"The SBA is wary of arrangements that attempt to circumvent equity injection rules, such as a 'gift' that's actually a loan you intend to repay. Any funds counting as equity must be truly 'at risk' without a fixed repayment obligation from the business. Be transparent with your lender about all funding sources to avoid issues.","url":"https://dealroom.so/glossary/disguised-debt","official_sources":[{"slug":"sop-50-10","title":"SOP 50 10 — Lender and Development Company Loan Programs","official_url":"https://www.sba.gov/document/sop-50-10-lender-development-company-loan-programs","official_label":"View on SBA.gov","authority_tier":2,"publisher":"U.S. Small Business Administration","source_guide_url":"https://dealroom.so/sba-7a/sources/sop-50-10"},{"slug":"13-cfr-part-120","title":"13 CFR Part 120 — Business Loans","official_url":"https://www.ecfr.gov/current/title-13/chapter-I/part-120","official_label":"View on eCFR","authority_tier":1,"publisher":"Office of the Federal Register","source_guide_url":"https://dealroom.so/sba-7a/sources/13-cfr-part-120"}],"related":[{"slug":"equity-injection","term":"Equity injection","url":"https://dealroom.so/glossary/equity-injection"},{"slug":"seller-note","term":"Seller note","url":"https://dealroom.so/glossary/seller-note"},{"slug":"standby-agreement","term":"Standby agreement","url":"https://dealroom.so/glossary/standby-agreement"},{"slug":"seasoned-funds","term":"Seasoned funds","url":"https://dealroom.so/glossary/seasoned-funds"}],"related_questions":[{"question":"Can I use an SBA 7(a) loan for debt consolidation of existing business debts?","url":"https://dealroom.so/sba-loans/basics/can-i-use-an-sba-7-a-loan-for-debt-consolidation-of-existing-business-debts"},{"question":"How is prior owner debt converted to equity treated for injection purposes?","url":"https://dealroom.so/for-lenders/questions/how-is-prior-owner-debt-converted-to-equity-treated-for-injection-purposes"},{"question":"Can I use an SBA 7(a) loan to refinance existing business debt?","url":"https://dealroom.so/sba-loans/basics/can-i-use-an-sba-7-a-loan-to-refinance-existing-business-debt"},{"question":"Can an SBA 7(a) loan be used to refinance existing business debt?","url":"https://dealroom.so/sba-loans/basics/can-an-sba-7-a-loan-be-used-to-refinance-existing-business-debt"},{"question":"Can I use an SBA 7(a) loan to pay off personal debt?","url":"https://dealroom.so/sba-loans/basics/can-i-use-an-sba-7-a-loan-to-pay-off-personal-debt"},{"question":"Does the SBA require a specific debt service coverage ratio (DSCR) for approval?","url":"https://dealroom.so/sba-7a/questions/does-the-sba-require-a-specific-debt-service-coverage-ratio-dscr-for-approval"}]},"caveats":["Definitions represent DealRoom's plain-English interpretation for buyers; verify regulatory terms against the official SBA and eCFR sources listed.","Not legal, tax, or financial advice, and not an SBA eligibility determination."],"citation":{"label":"DealRoom.so Glossary — Disguised debt","url":"https://dealroom.so/glossary/disguised-debt","source_type":"DealRoom Data"}}