For SBA lenders
Short answer
The lender must collect the settlement statement (CD), loan documents from the refinance, and bank statements showing the funds deposited into the borrower's account to verify the source and amount of the injection.
Funds derived from a personal residence refinance are acceptable for equity injection if properly documented. The lender must ensure the funds are truly unencumbered cash from the refinance proceeds and not from a subsequent loan or another prohibited source.
A borrower refinances their home, receiving $150,000 cash out. The lender would require the Closing Disclosure from the refinance, the new mortgage statement, and bank statements showing the $150,000 being deposited into the borrower's account and then subsequently injected into the business, free of any new liens or conditions.
Insider move
Lenders must meticulously verify the source of these funds to ensure they are genuinely from the refinance and are not disguised debt or from ineligible sources. Improper verification could lead to questions about the true equity injection and potential guaranty issues.
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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