For SBA lenders
Short answer
A lender verifies equity injection from a personal line of credit by obtaining the LOC agreement, statements showing the draw, and bank statements confirming the funds are deposited into the borrower's account.
For a personal line of credit (LOC) to count as equity injection, the funds must be drawn and irrevocably contributed to the business, becoming unencumbered. Lenders must review the LOC agreement to confirm it's in the borrower's name, obtain statements showing the actual draw of funds, and verify bank statements reflect the transfer of these funds into the business account or directly towards project costs, free of any lien or repayment obligation other than to the borrower.
A borrower intends to use $50,000 from a personal home equity line of credit (HELOC) as equity injection. The lender would request the HELOC agreement, a statement showing the $50,000 draw, and the borrower's bank statement confirming the $50,000 was transferred and is now unencumbered and available for the business acquisition.
Insider move
Lenders must ensure that LOC funds are fully drawn and committed as equity, not merely an available credit line. The primary concern is that these funds genuinely represent an owner's capital contribution and are not a secondary debt disguised as equity, which could impact the SBA loan's repayment.
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.
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