{"ok":true,"canonical_url":"https://dealroom.so/glossary/phantom-equity","api_url":"https://dealroom.so/api/public/glossary/phantom-equity","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":"phantom-equity","term":"Phantom equity","group":"Your money in the deal","definition":"This refers to funds that appear to be part of the buyer's equity injection but are actually derived from the business being acquired or from another loan that isn't properly disclosed. It's a major red flag for SBA lenders.","what_it_means":"The SBA strictly prohibits using funds from the target business or other undisclosed loans as your equity injection. Lenders will scrutinize your source of funds through bank statements and other documentation to ensure your equity is truly \"out of pocket\" and not \"phantom.\" This is a common pitfall for inexperienced buyers.","url":"https://dealroom.so/glossary/phantom-equity","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"}],"related":[{"slug":"equity-injection","term":"Equity injection","url":"https://dealroom.so/glossary/equity-injection"},{"slug":"round-tripped","term":"Round-tripped","url":"https://dealroom.so/glossary/round-tripped"},{"slug":"disguised-debt","term":"Disguised debt","url":"https://dealroom.so/glossary/disguised-debt"},{"slug":"seasoned-funds","term":"Seasoned funds","url":"https://dealroom.so/glossary/seasoned-funds"}],"related_questions":[{"question":"Can funds from a home equity line of credit be used for my equity injection?","url":"https://dealroom.so/sba-7a/questions/can-funds-from-a-home-equity-line-of-credit-be-used-for-my-equity-injection"},{"question":"Can I use funds from a home equity line of credit for my 10% equity injection?","url":"https://dealroom.so/sba-7a/questions/can-i-use-funds-from-a-home-equity-line-of-credit-for-my-10-equity-injection"},{"question":"How is 'sweat equity' or future services treated for an SBA 7(a) loan equity injection?","url":"https://dealroom.so/sba-7a/questions/how-is-sweat-equity-or-future-services-treated-for-an-sba-7-a-loan-equity-injection"},{"question":"Can sweat equity or future services I provide to the business count towards the required equity injection?","url":"https://dealroom.so/sba-7a/questions/can-sweat-equity-or-future-services-i-provide-to-the-business-count-towards-the-required-e"},{"question":"Can funds from a private equity firm count as equity injection for an SBA 7(a) loan?","url":"https://dealroom.so/sba-7a/questions/can-funds-from-a-private-equity-firm-count-as-equity-injection-for-an-sba-7-a-loan"},{"question":"Can a borrower's sweat equity count towards the required equity injection for a 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/can-a-borrower-s-sweat-equity-count-towards-the-required-equity-injection-for-a-7-a-loan"}]},"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 — Phantom equity","url":"https://dealroom.so/glossary/phantom-equity","source_type":"DealRoom Data"}}