{"ok":true,"canonical_url":"https://dealroom.so/sba-7a/questions/how-is-the-value-of-inventory-i-own-and-contribute-to-the-acquired-business-counted-toward","api_url":"https://dealroom.so/api/public/questions/how-is-the-value-of-inventory-i-own-and-contribute-to-the-acquired-business-counted-toward","question":"How is the value of inventory I own and contribute to the acquired business counted towards equity injection?","topic":"Down payment & equity injection","audience":"borrower","bot_mode":"buyer","short_answer":"The value of inventory contributed as equity injection is typically assessed at the lower of its cost or market value, and must be unencumbered.","rule":"SBA rules allow unencumbered business assets, including inventory, that are owned by the borrower and contributed to the acquired business to count towards the equity injection. The valuation must be supported by appropriate documentation, such as invoices or a professional appraisal, and the inventory must be essential for the business's operations and free of any liens.","example":"A buyer needs a $50,000 equity injection. They contribute $30,000 worth of unencumbered inventory from a related business they own, which is verified by invoices. They then add $20,000 in cash.","what_lenders_check":"Lenders will require documentation (e.g., invoices, inventory lists, appraisal) to verify the inventory's value and confirm it is unencumbered. They also assess if the inventory is suitable and necessary for the acquired business.","required_facts":["Inventory contribution","Unencumbered assets","Lower of cost/market","Documentation","Equity calculation"],"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":"Can I use retirement funds from a 401(k) as equity injection for a $750,000 business purchase?","url":"https://dealroom.so/sba-7a/questions/can-i-use-retirement-funds-from-a-401-k-as-equity-injection-for-a-750-000-business-purchas"},{"question":"Can funds from a home equity line of credit (HELOC) be used as my equity injection for a business acquisition?","url":"https://dealroom.so/sba-7a/questions/can-funds-from-a-home-equity-line-of-credit-heloc-be-used-as-my-equity-injection-for-a-bus"},{"question":"Is it possible to use a second mortgage on my personal residence as an equity injection for a $1.5 million business acquisition?","url":"https://dealroom.so/sba-7a/questions/is-it-possible-to-use-a-second-mortgage-on-my-personal-residence-as-an-equity-injection-fo"},{"question":"How much cash must I personally inject for an SBA 7(a) business acquisition?","url":"https://dealroom.so/sba-7a/questions/how-much-cash-must-i-personally-inject-for-an-sba-7-a-business-acquisition"},{"question":"What are the acceptable sources for my cash equity injection beyond personal savings?","url":"https://dealroom.so/sba-7a/questions/what-are-the-acceptable-sources-for-my-cash-equity-injection-beyond-personal-savings"},{"question":"What is the SBA's minimum required equity injection percentage for a business acquisition?","url":"https://dealroom.so/sba-7a/questions/what-is-the-sba-s-minimum-required-equity-injection-percentage-for-a-business-acquisition"}],"related_terms":[{"term":"Inventory value","url":"https://dealroom.so/glossary/inventory-value"},{"term":"Loan-to-Value","url":"https://dealroom.so/glossary/loan-to-value"},{"term":"Inventory","url":"https://dealroom.so/glossary/inventory"},{"term":"Repair to the guaranty","url":"https://dealroom.so/glossary/repair-to-the-guaranty"},{"term":"Loan-to-value ratio","url":"https://dealroom.so/glossary/loan-to-value-ratio"},{"term":"Alienate the Business","url":"https://dealroom.so/glossary/alienate-the-business"}],"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/how-is-the-value-of-inventory-i-own-and-contribute-to-the-acquired-business-counted-toward","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."]}