{"ok":true,"canonical_url":"https://dealroom.so/sba-7a/questions/what-are-the-eligibility-requirements-for-funds-borrowed-from-a-third-party-to-count-as-eq","api_url":"https://dealroom.so/api/public/questions/what-are-the-eligibility-requirements-for-funds-borrowed-from-a-third-party-to-count-as-eq","question":"What are the eligibility requirements for funds borrowed from a third party to count as equity injection?","topic":"Down payment & equity injection","audience":"borrower","bot_mode":"buyer","short_answer":"Funds borrowed from a third party can count as equity injection if the third-party loan is on full standby, fully subordinated to the SBA loan, and does not put the business in an undue debt position.","rule":"The SBA allows third-party debt to qualify as equity injection if it is fully subordinated to the SBA loan, meaning no payments of principal or interest are made until the SBA loan is repaid. This demonstrates a true equity-like commitment from the third-party lender.","example":"If you receive a $75,000 loan from a private investor for a $1,000,000 acquisition, this can count towards your 10% equity injection if the investor agrees to a subordination agreement prohibiting payments for the 10-year SBA loan term.","what_lenders_check":"Lenders scrutinize the source of funds, the financial capacity of the third-party lender, and the subordination agreement. They ensure that the terms are clear and that there is no hidden agenda or potential for the third party to demand repayment prematurely.","required_facts":["Third-party loan","Full subordination","Equity injection","No payments","Lender capacity"],"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":"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":"Borrowed funds","url":"https://dealroom.so/glossary/borrowed-funds"},{"term":"Third-Party Equity Investments","url":"https://dealroom.so/glossary/third-party-equity-investments"},{"term":"Borrowed Equity","url":"https://dealroom.so/glossary/borrowed-equity"},{"term":"Eligibility Requirements","url":"https://dealroom.so/glossary/eligibility-requirements"},{"term":"Third-party loan","url":"https://dealroom.so/glossary/third-party-loan"},{"term":"Third-party agent","url":"https://dealroom.so/glossary/third-party-agent"}],"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/what-are-the-eligibility-requirements-for-funds-borrowed-from-a-third-party-to-count-as-eq","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."]}