For SBA lenders
Short answer
Retirement funds can be used for equity injection if properly rolled over into a new qualified plan that allows for business investment, ensuring the funds are unencumbered and fully available to the business.
Funds from a qualified retirement account, such as a 401(k) or IRA, may be used for equity injection if they are rolled over into a "Rollovers for Business Start-ups" (ROBS) plan, which is a specific type of 401(k) plan that invests in the stock of a C Corporation. The funds must be fully accessible and not create a prohibited transaction or debt.
A borrower plans to use $150,000 from their 401(k). The lender verifies that these funds are rolled into a new ROBS-compliant 401(k) and then invested as equity in the C Corporation borrowing the 7(a) loan.
Lenders must verify the legitimacy of the ROBS plan, ensure compliance with IRS and DOL regulations, and confirm that the funds are genuinely equity in the borrower's business and not a loan. Legal counsel review is often required.
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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