For SBA lenders
Short answer
A loan from a non-owner family member can count as equity if it's fully subordinated to the SBA loan, has no repayment terms that jeopardize the business, and is properly documented.
If an equity injection is funded by a loan from a non-owner family member, the lender must ensure this debt is fully subordinated to the SBA loan. This means no payments of principal or interest are allowed until the SBA loan is repaid, unless otherwise specified in the authorization for partial standby. The source of these funds must also be verified, and a formal subordination agreement obtained.
A borrower's mother lends them $50,000 for their equity injection. The lender requires a formal subordination agreement, signed by the mother, stating that no payments will be made on her loan until the SBA 7(a) loan is fully satisfied. The lender also verifies the mother's ability to provide these funds.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
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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