Glossary · Your money in the deal
In short
This is an investor who contributes capital but has no operational control or management responsibilities in the business. The SBA has strict rules about their involvement to ensure the primary borrower maintains control.
The SBA generally prohibits passive investors from having significant ownership (e.g., typically over 20%) in a business receiving a 7(a) loan, especially if it dilutes the primary owner's control. If you have investors, ensure they meet SBA guidelines for management involvement, or consider alternative funding structures.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 — Lender and Development Company Loan Programs
U.S. Small Business Administration · SBA Standard Operating Procedure
Last checked 2026-06-15. Official sources control — verify before relying on any rule for a live deal.
Defined by DealRoom.so SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-15 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
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