{"ok":true,"canonical_url":"https://dealroom.so/for-lenders/questions/what-are-the-specific-requirements-for-a-lender-to-document-and-verify-an-equity-injection","api_url":"https://dealroom.so/api/public/questions/what-are-the-specific-requirements-for-a-lender-to-document-and-verify-an-equity-injection","question":"What are the specific requirements for a lender to document and verify an equity injection from a retirement account structured as a ROBS (Rollover for Business Startups) transaction?","topic":"Equity injection verification","audience":"lender","bot_mode":"lender","short_answer":"For a ROBS equity injection, the lender must obtain documentation from the ROBS facilitator, verify the establishment of the C-Corp and 401(k) plan, and confirm the rollover of funds from the retirement account into the new C-Corp's business account. The transaction must comply with IRS regulations.","rule":"A Rollover for Business Startups (ROBS) allows individuals to use retirement funds for equity injection without incurring taxes or penalties, by rolling them into a new C-Corporation that sponsors a 401(k) plan. Lenders must verify the legitimacy of the ROBS transaction by obtaining all relevant documentation from the ROBS facilitator, including the C-Corp formation, 401(k) plan documents, and evidence of funds being properly transferred from the individual's existing retirement account to the C-Corp's business account. The lender must also ensure the borrower's ownership in the C-Corp is direct and not through the 401(k) plan.","example":"A borrower plans a $200,000 equity injection via a ROBS transaction. The lender requires copies of the newly formed C-Corp's articles of incorporation, the adopted 401(k) plan document, and bank statements showing the $200,000 transferred from the borrower's IRA into the C-Corp's operating account. The lender also obtains a confirmation letter from the ROBS facilitator.","what_lenders_check":"ROBS transactions are complex and carry specific IRS compliance risks. Lenders must ensure meticulous documentation and verification to confirm the funds are legitimately injected equity, not debt, and that the structure complies with all rules to avoid jeopardizing the SBA loan.","required_facts":["ROBS transaction","Equity injection","Retirement account rollover","C-Corp formation","IRS compliance"],"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":"Equity injection","url":"https://dealroom.so/glossary/equity-injection"},{"term":"Indemnification from the Seller","url":"https://dealroom.so/glossary/indemnification-from-the-seller"},{"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/what-are-the-specific-requirements-for-a-lender-to-document-and-verify-an-equity-injection","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."]}