{"ok":true,"canonical_url":"https://dealroom.so/for-lenders/questions/how-should-a-lender-verify-a-borrower-s-equity-injection-funded-by-a-loan-from-a-non-owner","api_url":"https://dealroom.so/api/public/questions/how-should-a-lender-verify-a-borrower-s-equity-injection-funded-by-a-loan-from-a-non-owner","question":"How should a lender verify a borrower's equity injection funded by a loan from a non-owner family member?","topic":"Equity injection verification","audience":"lender","bot_mode":"lender","short_answer":"The lender must verify the source of funds and ensure the loan is on full standby, with no payments of principal or interest for the life of the SBA loan. The note must not be secured by any assets of the small business.","rule":"For a non-owner loan to count as equity injection, it must be on full standby, meaning no payments are permitted to the lender of these funds during the term of the SBA loan. This ensures the capital is treated as true equity and does not create an additional debt service burden for the business.","example":"A borrower needs $100,000 equity for an acquisition. Her sister lends her $70,000 for the injection. The lender requires a standby agreement from the sister, stating no payments for principal or interest are due until the SBA loan is repaid in full, and it's unsecured.","what_lenders_check":"The lender's primary concern is ensuring the standby agreement is properly executed, enforceable, and meets all SBA requirements. They verify the source of funds to prevent layering of debt disguised as equity and confirm the loan is not secured by business assets.","required_facts":["Non-owner loan","Family member","Full standby agreement","Equity injection","Unsecured debt"],"source_families":["SOP 50 10 - Lender and Development Company Loan Programs","13 CFR Part 120 - Business Loans","Standard 7(a) Authorization File Library"],"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":"Standard 7(a) Authorization File Library","url":"https://www.sba.gov/document/support-standard-7a-authorization-file-library"}],"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":"Equity injection","url":"https://dealroom.so/glossary/equity-injection"},{"term":"Borrower Equity","url":"https://dealroom.so/glossary/borrower-equity"},{"term":"Minimum Equity Injection","url":"https://dealroom.so/glossary/minimum-equity-injection"},{"term":"Tangible Equity Injection","url":"https://dealroom.so/glossary/tangible-equity-injection"},{"term":"Hidden Equity Injection","url":"https://dealroom.so/glossary/hidden-equity-injection"},{"term":"Equity injection verification","url":"https://dealroom.so/glossary/equity-injection-verification"}],"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-should-a-lender-verify-a-borrower-s-equity-injection-funded-by-a-loan-from-a-non-owner","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."]}