{"ok":true,"canonical_url":"https://dealroom.so/for-lenders/questions/can-a-borrower-s-investment-in-leasehold-improvements-prior-to-loan-closing-count-towards-","api_url":"https://dealroom.so/api/public/questions/can-a-borrower-s-investment-in-leasehold-improvements-prior-to-loan-closing-count-towards-","question":"Can a borrower's investment in leasehold improvements prior to loan closing count towards the equity injection?","topic":"Equity Injection Verification","audience":"lender","bot_mode":"lender","short_answer":"Yes, a borrower's investment in leasehold improvements made prior to loan closing can count towards the equity injection, provided the costs are properly documented and verified by the lender.","rule":"SBA allows certain non-cash contributions, including direct cash payments for project costs, to count towards the equity injection. Leasehold improvements paid for by the borrower, if they are part of the overall project cost and verifiable, can be considered. The lender must obtain invoices, proof of payment, and potentially inspections to confirm the value and expenditure.","example":"A borrower is acquiring a business and signs a new lease. Prior to closing, they spend $20,000 of their own cash to build out an office space. The lender would review contractor invoices, lien waivers, and bank statements showing payment, along with an inspection report, to verify this $20,000 as part of the equity injection.","what_lenders_check":"Lenders must ensure that any non-cash equity injection, such as leasehold improvements, is properly valued, documented, and paid for by the borrower with unencumbered funds. Inaccurate valuation or insufficient documentation can lead to a deficiency in the required equity and a guaranty repair.","required_facts":["Leasehold improvements","Documentation","Proof of payment","Project costs","Unencumbered funds"],"source_families":["SOP 50 10 - Lender and Development Company Loan Programs","13 CFR Part 120 - Business Loans"],"official_sources":[{"title":"SOP 50 10 - Lender and Development Company Loan Programs","url":"https://www.sba.gov/sites/default/files/2025-05/SOP%2050%2010%208%20Technical%20Updates%20effective%206.1.2025.docx"},{"title":"13 CFR Part 120 - Business Loans","url":"https://www.ecfr.gov/current/title-13/chapter-I/part-120"}],"related_questions":[{"question":"How does a lender verify equity injection funds originating from a newly established business bank account?","url":"https://dealroom.so/for-lenders/questions/how-does-a-lender-verify-equity-injection-funds-originating-from-a-newly-established-busin"},{"question":"What specific documentation is required to verify the source of gifted equity injection funds from a foreign family member?","url":"https://dealroom.so/for-lenders/questions/what-specific-documentation-is-required-to-verify-the-source-of-gifted-equity-injection-fu"},{"question":"If a borrower contributes equipment as equity, how does the lender verify its fair market value?","url":"https://dealroom.so/for-lenders/questions/if-a-borrower-contributes-equipment-as-equity-how-does-the-lender-verify-its-fair-market-v"},{"question":"What specific conditions must a personal loan from a non-owner family member meet to count as equity injection for a 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/what-specific-conditions-must-a-personal-loan-from-a-non-owner-family-member-meet-to-count"},{"question":"How does a lender verify the source of gifted equity injection funds from a foreign national?","url":"https://dealroom.so/for-lenders/questions/how-does-a-lender-verify-the-source-of-gifted-equity-injection-funds-from-a-foreign-nation"},{"question":"Can a loan from a non-owner family member count as equity injection for a 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/can-a-loan-from-a-non-owner-family-member-count-as-equity-injection-for-a-7-a-loan"}],"related_terms":[{"term":"Leasehold improvements","url":"https://dealroom.so/glossary/leasehold-improvements"},{"term":"Equity Investment","url":"https://dealroom.so/glossary/equity-investment"},{"term":"Renovations or Leasehold Improvements","url":"https://dealroom.so/glossary/renovations-or-leasehold-improvements"},{"term":"Borrower Equity","url":"https://dealroom.so/glossary/borrower-equity"},{"term":"Equity in real estate","url":"https://dealroom.so/glossary/equity-in-real-estate"},{"term":"Seller's equity","url":"https://dealroom.so/glossary/seller-s-equity"}],"related_tools":[{"name":"SBA 7(a) payment & fee calculator","url":"https://dealroom.so/sba-7a/calculator"},{"name":"Find an active SBA 7(a) lender","url":"https://dealroom.so/lenders"}],"data_freshness":{"last_reviewed":"2026-06-13","sba_rule_sources_checked_through":"2026-06-13"},"citation":{"label":"DealRoom.so SBA 7(a) Q&A","url":"https://dealroom.so/for-lenders/questions/can-a-borrower-s-investment-in-leasehold-improvements-prior-to-loan-closing-count-towards-","source_type":"DealRoom Q&A"},"caveats":["Grounded in the current SBA rulebook; verify against official sources before relying on it for a live deal.","Not legal, tax, or financial advice and not an approval decision."]}