For SBA lenders
Short answer
Yes, a loan from a non-owner family member can count towards equity injection if it is on full standby, unsecured, and has no repayment or interest for the life of the SBA loan.
SBA considers a loan from a non-owner family member as equity injection if it is structured as a full standby agreement. This means the family member cannot be repaid principal or interest until the SBA loan is paid in full, and the debt must be unsecured and fully subordinated to the SBA loan. This ensures the funds are truly 'at risk' within the business.
A borrower receives a $50,000 loan from their sibling for equity. The lender requires a full standby agreement stating no principal or interest payments will be made until the $500,000 SBA loan is repaid. The agreement also specifies it's unsecured and subordinated.
Insider move
Lenders must ensure the standby agreement is legally binding, properly executed, and clearly meets all full standby requirements. This includes verifying the family member is not an owner and that the terms unequivocally subordinate their debt to the SBA loan, with no repayment or interest during the SBA loan's term.
7(a) Loan Program — Terms, Conditions, and Eligibility
U.S. Small Business Administration · Official SBA source
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.
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