SBA 7(a) Q&A
Short answer
No, generally, funds from a cash-out refinance of a personal home are considered debt and cannot be used for the required equity injection.
The SBA requires equity injection funds to be unencumbered. A cash-out refinance creates new debt that must be repaid, which the SBA considers an impermissible source for equity injection, as it would indirectly burden the borrower's ability to repay the business loan.
If you need a $100,000 equity injection for a $1,000,000 business and consider refinancing your home to pull out $100,000, the lender would disallow these funds. You would need to use existing savings or other unencumbered sources.
Insider move
Lenders diligently verify the source of the equity injection to ensure it is not borrowed money that would create additional debt service for the borrower, thereby undermining the business's projected cash flow.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
7(a) Loan Program — Terms, Conditions, and Eligibility
U.S. Small Business Administration · Official SBA source
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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