For SBA lenders
Short answer
The lender must verify the source of funds and ensure the loan is on full standby, with no payments of principal or interest for the life of the SBA loan. The note must not be secured by any assets of the small business.
For a non-owner loan to count as equity injection, it must be on full standby, meaning no payments are permitted to the lender of these funds during the term of the SBA loan. This ensures the capital is treated as true equity and does not create an additional debt service burden for the business.
A borrower needs $100,000 equity for an acquisition. Her sister lends her $70,000 for the injection. The lender requires a standby agreement from the sister, stating no payments for principal or interest are due until the SBA loan is repaid in full, and it's unsecured.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 - Lender and Development Company Loan Programs
Standard 7(a) Authorization File Library
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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