SBA 7(a) Q&A
Short answer
Yes, a pre-paid lease can be considered part of the equity injection if it represents a bona fide cash outlay by the buyer, is non-refundable, and reduces the business's operating costs.
Pre-paid expenses, such as rent, can qualify as equity if they are documented as an actual cash injection by the borrower into the business, directly benefit the business, and are non-refundable. The amount must be clearly itemized and verifiable.
A buyer pre-pays 12 months of rent at $5,000/month for the acquired business's facility, totaling $60,000. This $60,000, if documented as an unrecoverable cash outlay, can count towards the equity injection.
Insider move
Lenders verify that the pre-payment is non-refundable and represents a true cash injection by the borrower, not just a rearrangement of existing business obligations. They require the lease agreement and proof of payment.
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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