{"ok":true,"canonical_url":"https://dealroom.so/for-lenders/questions/what-documentation-is-required-to-verify-equity-injection-funds-originating-from-a-newly-r","api_url":"https://dealroom.so/api/public/questions/what-documentation-is-required-to-verify-equity-injection-funds-originating-from-a-newly-r","question":"What documentation is required to verify equity injection funds originating from a newly refinanced personal residence?","topic":"Equity Injection Verification","audience":"lender","bot_mode":"lender","short_answer":"Lenders must obtain a settlement statement (HUD-1 or Closing Disclosure) from the refinance, bank statements showing the funds received, and evidence of the funds' transfer to the business or escrow. It must be demonstrated the funds are unencumbered.","rule":"When equity injection comes from the proceeds of a personal residence refinance, the lender must verify that the funds are genuinely from the refinance and are truly unencumbered. This involves tracing the funds from the refinance closing to the borrower's account and then to the equity injection. The lender must ensure the refinance itself is not part of a scheme to circumvent equity requirements.","example":"A borrower refinances their home, receiving $100,000 cash out. To use $75,000 for equity, the lender requires the Closing Disclosure from the refinance, bank statements showing the $100,000 deposit, and a wire confirmation showing the $75,000 moved to escrow for the business acquisition.","what_lenders_check":"Lenders must confirm the refinance proceeds are not encumbered by another loan or obligation that would effectively reduce the true equity. The source must be clearly documented to avoid any 'loan for equity' issues.","required_facts":["Refinanced residence","Equity injection","Unencumbered funds","Settlement statement","Bank statements"],"source_families":["SOP 50 10 - Lender and Development Company Loan Programs","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":"7(a) Loan Program Terms, Conditions, and Eligibility","url":"https://www.sba.gov/partners/lenders/7a-loan-program/terms-conditions-eligibility"}],"related_questions":[{"question":"How does a lender verify equity injection funds originating from a newly established business bank account?","url":"https://dealroom.so/for-lenders/questions/how-does-a-lender-verify-equity-injection-funds-originating-from-a-newly-established-busin"},{"question":"Can a borrower's investment in leasehold improvements prior to loan closing count towards the equity injection?","url":"https://dealroom.so/for-lenders/questions/can-a-borrower-s-investment-in-leasehold-improvements-prior-to-loan-closing-count-towards-"},{"question":"What specific documentation is required to verify the source of gifted equity injection funds from a foreign family member?","url":"https://dealroom.so/for-lenders/questions/what-specific-documentation-is-required-to-verify-the-source-of-gifted-equity-injection-fu"},{"question":"If a borrower contributes equipment as equity, how does the lender verify its fair market value?","url":"https://dealroom.so/for-lenders/questions/if-a-borrower-contributes-equipment-as-equity-how-does-the-lender-verify-its-fair-market-v"},{"question":"What specific conditions must a personal loan from a non-owner family member meet to count as equity injection for a 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/what-specific-conditions-must-a-personal-loan-from-a-non-owner-family-member-meet-to-count"},{"question":"How does a lender verify the source of gifted equity injection funds from a foreign national?","url":"https://dealroom.so/for-lenders/questions/how-does-a-lender-verify-the-source-of-gifted-equity-injection-funds-from-a-foreign-nation"}],"related_terms":[{"term":"Equity injection","url":"https://dealroom.so/glossary/equity-injection"},{"term":"Personal Funds","url":"https://dealroom.so/glossary/personal-funds"},{"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-documentation-is-required-to-verify-equity-injection-funds-originating-from-a-newly-r","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."]}