{"ok":true,"canonical_url":"https://dealroom.so/for-lenders/questions/can-a-lender-accept-contributed-equity-in-the-form-of-existing-machinery-valued-by-an-inte","api_url":"https://dealroom.so/api/public/questions/can-a-lender-accept-contributed-equity-in-the-form-of-existing-machinery-valued-by-an-inte","question":"Can a lender accept contributed equity in the form of existing machinery valued by an internal appraisal?","topic":"Equity Injection Verification","audience":"lender","bot_mode":"lender","short_answer":"No, contributed equity in the form of existing machinery requires an independent, third-party appraisal to establish its fair market value, not an internal appraisal.","rule":"When equity injection consists of non-cash assets, the SBA requires that their value be established by an independent valuation or appraisal. This ensures the value is objective and reflects the asset's true fair market value, preventing inflated equity claims. Internal appraisals are not considered independent.","example":"A borrower for a $600,000 startup loan proposes contributing $60,000 worth of existing manufacturing equipment as equity. The lender must require an appraisal from an accredited, independent equipment appraiser to establish the machinery's fair market value. The lender cannot accept a valuation performed by the borrower's employee or an affiliated party.","what_lenders_check":"Lenders must ensure the contributed asset's value is legitimate and verifiable. Accepting an internal appraisal is a significant risk, as it can lead to an overstatement of equity, which could result in a guaranty repair or denial if the loan defaults.","required_facts":["Non-cash equity","Existing machinery","Independent appraisal required","Fair market value"],"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":"Can a borrower's investment in leasehold improvements prior to loan closing count towards the equity injection?","url":"https://dealroom.so/for-lenders/questions/can-a-borrower-s-investment-in-leasehold-improvements-prior-to-loan-closing-count-towards-"},{"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"}],"related_terms":[{"term":"Equity in real estate","url":"https://dealroom.so/glossary/equity-in-real-estate"},{"term":"Contributed Asset","url":"https://dealroom.so/glossary/contributed-asset"},{"term":"Contributed Equipment","url":"https://dealroom.so/glossary/contributed-equipment"},{"term":"Assignment of Policy Form","url":"https://dealroom.so/glossary/assignment-of-policy-form"},{"term":"Existing Line of Credit","url":"https://dealroom.so/glossary/existing-line-of-credit"},{"term":"Buyout of a Partner","url":"https://dealroom.so/glossary/buyout-of-a-partner"}],"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":"2026-06-14","sba_rule_sources_checked_through":"2026-06-14"},"citation":{"label":"DealRoom.so SBA 7(a) Q&A","url":"https://dealroom.so/for-lenders/questions/can-a-lender-accept-contributed-equity-in-the-form-of-existing-machinery-valued-by-an-inte","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."]}