For SBA lenders
Short answer
Yes, a borrower's investment in leasehold improvements made prior to loan closing can count towards the equity injection, provided the costs are properly documented and verified by the lender.
SBA allows certain non-cash contributions, including direct cash payments for project costs, to count towards the equity injection. Leasehold improvements paid for by the borrower, if they are part of the overall project cost and verifiable, can be considered. The lender must obtain invoices, proof of payment, and potentially inspections to confirm the value and expenditure.
A borrower is acquiring a business and signs a new lease. Prior to closing, they spend $20,000 of their own cash to build out an office space. The lender would review contractor invoices, lien waivers, and bank statements showing payment, along with an inspection report, to verify this $20,000 as part of the equity injection.
Insider move
Lenders must ensure that any non-cash equity injection, such as leasehold improvements, is properly valued, documented, and paid for by the borrower with unencumbered funds. Inaccurate valuation or insufficient documentation can lead to a deficiency in the required equity and a guaranty repair.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 - Lender and Development Company Loan Programs
Last checked 2026-06-13. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-13 · SBA sources checked through 2026-06-13. DealRoom analysis of public SBA 7(a) lending records (FY2020–present). Grounded in the current SBA rulebook; verify against the official sources above before relying on it for a live deal. Not legal, tax, or financial advice, and not an approval decision.
More on equity injection verification
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