For SBA lenders
Short answer
If a business owner contributes pre-existing business equipment as equity, the lender must obtain an independent appraisal or valuation of the equipment, proof of ownership, and documentation showing it is unencumbered.
Non-cash assets can count as equity injection if their value is properly substantiated. For equipment, this requires an independent valuation to confirm its fair market value. The lender must also verify that the equipment is fully owned by the borrower (or the new business entity) and is free of any liens or encumbrances, ensuring it provides genuine equity to the project.
A borrower is acquiring a business and contributing $50,000 in existing equipment from another venture as part of their $100,000 equity injection. The lender requests an independent equipment appraisal from a qualified third party, title documents or bills of sale proving ownership, and a UCC search showing no liens against the equipment.
Insider move
Lenders are concerned about over-valuing non-cash assets and ensuring they are genuinely unencumbered. An inflated valuation or undisclosed lien could lead to an insufficient equity injection and potentially a guaranty repair.
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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