For SBA lenders
Short answer
No, contributed equity in the form of existing machinery requires an independent, third-party appraisal to establish its fair market value, not an internal appraisal.
When equity injection consists of non-cash assets, the SBA requires that their value be established by an independent valuation or appraisal. This ensures the value is objective and reflects the asset's true fair market value, preventing inflated equity claims. Internal appraisals are not considered independent.
A borrower for a $600,000 startup loan proposes contributing $60,000 worth of existing manufacturing equipment as equity. The lender must require an appraisal from an accredited, independent equipment appraiser to establish the machinery's fair market value. The lender cannot accept a valuation performed by the borrower's employee or an affiliated party.
Insider move
Lenders must ensure the contributed asset's value is legitimate and verifiable. Accepting an internal appraisal is a significant risk, as it can lead to an overstatement of equity, which could result in a guaranty repair or denial if the loan defaults.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 - Lender and Development Company Loan Programs
Last checked 2026-06-14. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-14 · SBA sources checked through 2026-06-14. 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.
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