For SBA lenders
Short answer
A personal loan from a non-owner family member can count as equity injection if it is on full standby, documented by a subordination agreement, and has no repayment or interest payments for the life of the SBA loan.
For a loan to qualify as equity, it must not create additional debt service burden on the business or borrower that competes with the SBA loan. Therefore, any loan from a non-owner family member (or any third party) that is intended to count towards the equity injection must be fully subordinated to the SBA loan, meaning no principal or interest payments are made until the SBA loan is repaid in full.
A borrower receives a $25,000 loan from their sibling for equity injection. The lender would require a formal subordination agreement signed by the sibling, explicitly stating that no payments of principal or interest will be made on the $25,000 loan until the SBA 7(a) loan is paid in full.
Insider move
Lenders must ensure that any subordinated debt intended as equity truly carries no repayment obligation during the SBA loan term. Improperly structured or documented standby agreements can lead to a finding of insufficient equity and 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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