For SBA lenders
Short answer
A personal loan can count as equity injection if it is unsecured or secured by assets not financed by the SBA loan and not pledged to the business. Documentation includes the loan agreement, proof of funds transfer, and verification of the security asset's unencumbered status.
Equity injection must come from the borrower's permanent capital, unencumbered by liens that would jeopardize the SBA loan. If a personal loan is used, it must not be secured by any assets of the business being acquired or those collateralizing the SBA loan. The source of the personal loan funds must be verified to ensure they are not disguised business debt.
A borrower applies for a $500,000 acquisition loan requiring a $50,000 equity injection. The borrower takes a $50,000 personal loan secured by their vacation home, which is free of other liens and not part of the business assets. The lender verifies the vacation home title, the personal loan agreement, and the transfer of funds to the borrower's business account.
Insider move
Lenders must meticulously verify the source of funds for equity injection to ensure it is not debt disguised as equity, particularly if the new debt could impact the borrower's global cash flow or collateral position. The personal loan must be clearly distinct from the SBA loan.
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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