{"ok":true,"canonical_url":"https://dealroom.so/sba-7a/questions/can-a-loan-from-a-non-owner-friend-count-towards-the-equity-injection-if-it-has-favorable-","api_url":"https://dealroom.so/api/public/questions/can-a-loan-from-a-non-owner-friend-count-towards-the-equity-injection-if-it-has-favorable-","question":"Can a loan from a non-owner friend count towards the equity injection if it has favorable terms?","topic":"Gift/Investor funds","audience":"borrower","bot_mode":"buyer","short_answer":"A loan from a non-owner friend can count towards equity injection only if it is fully subordinated to the SBA loan (full standby) and meets specific SBA 'at risk' requirements, regardless of favorable terms.","rule":"For a third-party loan (including from a friend) to qualify as equity injection, it must be on full standby. This means no principal or interest payments can be made until the SBA 7(a) loan is fully repaid, or with the express written consent of the SBA lender. The loan must also be unsecured by any business assets. Favorable terms alone do not supersede the subordination requirement.","example":"Your friend lends you $30,000 for your $100,000 equity injection. This $30,000 loan must be formally documented as fully subordinated to the SBA loan, meaning your friend cannot receive any payments until the SBA loan is paid off, even if the interest rate is 0%.","what_lenders_check":"Lenders rigorously enforce the subordination requirement for any borrowed funds counting as equity. They need to ensure these funds are truly 'at risk' and do not create additional repayment obligations that could compete with the SBA loan.","required_facts":["Full standby loan","Unsecured by business assets","No repayment until SBA loan repaid","Lender consent","Source of funds"],"source_families":["SOP 50 10 - Lender and Development Company Loan Programs","13 CFR Part 120 - Business Loans","7(a) Loan Program Terms, Conditions, and Eligibility"],"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"},{"title":"7(a) Loan Program Terms, Conditions, and Eligibility","url":"https://www.sba.gov/partners/lenders/7a-loan-program/terms-conditions-eligibility"}],"related_questions":[{"question":"What specific documentation is required for a cash gift from an immediate family member for my equity injection?","url":"https://dealroom.so/sba-7a/questions/what-specific-documentation-is-required-for-a-cash-gift-from-an-immediate-family-member-fo"},{"question":"Can a subordinated loan from a private third-party investor count as equity injection for an SBA 7(a) loan?","url":"https://dealroom.so/sba-7a/questions/can-a-subordinated-loan-from-a-private-third-party-investor-count-as-equity-injection-for-"},{"question":"Can gift funds from a foreign relative count towards my SBA 7(a) equity injection if properly documented?","url":"https://dealroom.so/sba-7a/questions/can-gift-funds-from-a-foreign-relative-count-towards-my-sba-7-a-equity-injection-if-proper"}],"related_terms":[{"term":"Non-Cash Equity Injection","url":"https://dealroom.so/glossary/non-cash-equity-injection"},{"term":"Equity injection","url":"https://dealroom.so/glossary/equity-injection"},{"term":"Owner Equity","url":"https://dealroom.so/glossary/owner-equity"},{"term":"Equity Owner","url":"https://dealroom.so/glossary/equity-owner"},{"term":"Indemnification from the Seller","url":"https://dealroom.so/glossary/indemnification-from-the-seller"},{"term":"Minimum Equity Injection","url":"https://dealroom.so/glossary/minimum-equity-injection"}],"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/sba-7a/questions/can-a-loan-from-a-non-owner-friend-count-towards-the-equity-injection-if-it-has-favorable-","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."]}