{"ok":true,"canonical_url":"https://dealroom.so/sba-7a/questions/can-i-use-funds-from-an-investor-who-will-own-less-than-20-of-the-business-for-my-equity-i","api_url":"https://dealroom.so/api/public/questions/can-i-use-funds-from-an-investor-who-will-own-less-than-20-of-the-business-for-my-equity-i","question":"Can I use funds from an investor who will own less than 20% of the business for my equity injection?","topic":"Investor funds","audience":"borrower","bot_mode":"buyer","short_answer":"Yes, funds from an investor owning less than 20% of the business can be used for equity, provided the investment is unsecured and on full standby if they are also a lender.","rule":"Investor funds are acceptable as equity injection. If the investor receives an equity stake, it must be properly documented. If the investor also provides a loan to the business, that loan must be on full standby to the SBA loan and unsecured to count as equity.","example":"If a new investor contributes $50,000 for a 10% stake in your $1 million acquisition, these funds count towards your equity injection. The lender will review the investment agreement and source of funds.","what_lenders_check":"Lenders ensure the investor funds are genuine equity, not a disguised loan that could compete with the SBA loan. They verify the source of funds and confirm the investor's ownership stake and any associated agreements are properly documented.","required_facts":["Investor ownership percentage","Investment agreement","Source of funds","Standby agreement (if loan)","Documentation"],"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":[],"related_terms":[{"term":"Use of funds","url":"https://dealroom.so/glossary/use-of-funds"},{"term":"Eligible Use of Funds","url":"https://dealroom.so/glossary/eligible-use-of-funds"},{"term":"Indemnification from the Seller","url":"https://dealroom.so/glossary/indemnification-from-the-seller"},{"term":"Will/trust","url":"https://dealroom.so/glossary/will-trust"},{"term":"Investor","url":"https://dealroom.so/glossary/investor"},{"term":"Use of proceeds","url":"https://dealroom.so/glossary/use-of-proceeds"}],"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/sba-7a/questions/can-i-use-funds-from-an-investor-who-will-own-less-than-20-of-the-business-for-my-equity-i","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."]}