{"ok":true,"canonical_url":"https://dealroom.so/for-lenders/questions/how-does-a-lender-verify-equity-injection-from-a-personal-line-of-credit-that-is-not-fully","api_url":"https://dealroom.so/api/public/questions/how-does-a-lender-verify-equity-injection-from-a-personal-line-of-credit-that-is-not-fully","question":"How does a lender verify equity injection from a personal line of credit that is not fully drawn?","topic":"Equity injection verification","audience":"lender","bot_mode":"lender","short_answer":"A lender verifies equity injection from a personal line of credit by obtaining the LOC agreement, statements showing the draw, and bank statements confirming the funds are deposited into the borrower's account.","rule":"For a personal line of credit (LOC) to count as equity injection, the funds must be drawn and irrevocably contributed to the business, becoming unencumbered. Lenders must review the LOC agreement to confirm it's in the borrower's name, obtain statements showing the actual draw of funds, and verify bank statements reflect the transfer of these funds into the business account or directly towards project costs, free of any lien or repayment obligation other than to the borrower.","example":"A borrower intends to use $50,000 from a personal home equity line of credit (HELOC) as equity injection. The lender would request the HELOC agreement, a statement showing the $50,000 draw, and the borrower's bank statement confirming the $50,000 was transferred and is now unencumbered and available for the business acquisition.","what_lenders_check":"Lenders must ensure that LOC funds are fully drawn and committed as equity, not merely an available credit line. The primary concern is that these funds genuinely represent an owner's capital contribution and are not a secondary debt disguised as equity, which could impact the SBA loan's repayment.","required_facts":["Personal line of credit","Funds drawn","LOC agreement","Bank statements","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":"What documentation verifies funds for equity injection transferred from a personal investment account?","url":"https://dealroom.so/for-lenders/questions/what-documentation-verifies-funds-for-equity-injection-transferred-from-a-personal-investm"},{"question":"How does a lender verify equity injection funds that are a cash gift from a non-family third party?","url":"https://dealroom.so/for-lenders/questions/how-does-a-lender-verify-equity-injection-funds-that-are-a-cash-gift-from-a-non-family-thi"},{"question":"Can a borrower's investment in a certificate of deposit (CD) count towards the required equity injection?","url":"https://dealroom.so/for-lenders/questions/can-a-borrower-s-investment-in-a-certificate-of-deposit-cd-count-towards-the-required-equi"},{"question":"What specific documentation is required to verify equity injection funds originating from a borrower's existing business assets, such as equipment or inventory?","url":"https://dealroom.so/for-lenders/questions/what-specific-documentation-is-required-to-verify-equity-injection-funds-originating-from-"},{"question":"How does a lender verify the source of gifted equity injection funds when the donor is a foreign national?","url":"https://dealroom.so/for-lenders/questions/how-does-a-lender-verify-the-source-of-gifted-equity-injection-funds-when-the-donor-is-a-f"},{"question":"How does a lender verify equity injection funds that are sourced from a personal line of credit secured by non-personal real estate?","url":"https://dealroom.so/for-lenders/questions/how-does-a-lender-verify-equity-injection-funds-that-are-sourced-from-a-personal-line-of-c"}],"related_terms":[{"term":"Personal line of credit","url":"https://dealroom.so/glossary/personal-line-of-credit"},{"term":"Home equity line of credit","url":"https://dealroom.so/glossary/home-equity-line-of-credit"},{"term":"Secured Personal Line of Credit","url":"https://dealroom.so/glossary/secured-personal-line-of-credit"},{"term":"Line of credit","url":"https://dealroom.so/glossary/line-of-credit"},{"term":"Equity injection","url":"https://dealroom.so/glossary/equity-injection"},{"term":"Credit Line","url":"https://dealroom.so/glossary/credit-line"}],"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/how-does-a-lender-verify-equity-injection-from-a-personal-line-of-credit-that-is-not-fully","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."]}