For SBA lenders
Short answer
Illiquid assets from an investment account generally do not count as a cash equity injection unless they are converted to cash prior to closing and the source is properly documented.
SBA rules require equity injection to be from unencumbered, verifiable sources. While investment accounts can be a source, the funds must be liquid and available at closing. Illiquid assets, such as private equity holdings or restricted stock, typically need to be sold and converted to cash, with the transaction documented to trace the funds.
A borrower claims $100,000 equity from their private stock portfolio. The lender requires documentation showing the sale of these stocks, the deposit of the cash into a verifiable account, and a no-lien affidavit to confirm the funds are unencumbered before closing.
Insider move
Lenders must ensure that equity injection funds are genuinely the borrower's unencumbered cash and are readily available. Verifying the conversion of illiquid assets to cash prevents issues with fund availability and ensures compliance with SBA equity requirements.
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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