For SBA lenders
Short answer
Lenders must obtain the loan agreement for the personal loan (HELOC), settlement statements, and bank statements showing the funds' disbursement and deposit into the borrower's account. It must be determined if these funds are truly unencumbered equity.
The SBA generally prohibits borrowed funds for equity injection unless fully secured by assets other than the business assets or the borrower's personal residence. Lenders must document the source of such funds, verify the personal loan's terms, and ensure it does not create a prohibited junior lien on business assets or the residence securing the SBA loan.
A borrower indicates a $100,000 HELOC as part of a $200,000 equity injection for a $2M acquisition loan. The lender requests the HELOC agreement, a recent HELOC statement, and bank statements showing the funds moving from the HELOC to the borrower's operating account, verifying the HELOC is secured by the personal residence and not by business assets.
Insider move
Lenders must verify the HELOC is secured solely by the borrower's personal, unencumbered real estate. They must ensure the equity injection is truly 'at risk' capital and not borrowed against assets pledged for the SBA loan. Improperly sourced equity is a major guaranty denial risk.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 - Lender and Development Company Loan Programs
Last checked 2026-06-14. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-14 · SBA sources checked through 2026-06-14. 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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