SBA 7(a) Q&A
Short answer
A loan from a non-owner friend can count towards equity injection only if it is fully subordinated to the SBA loan (full standby) and meets specific SBA 'at risk' requirements, regardless of favorable terms.
For a third-party loan (including from a friend) to qualify as equity injection, it must be on full standby. This means no principal or interest payments can be made until the SBA 7(a) loan is fully repaid, or with the express written consent of the SBA lender. The loan must also be unsecured by any business assets. Favorable terms alone do not supersede the subordination requirement.
Your friend lends you $30,000 for your $100,000 equity injection. This $30,000 loan must be formally documented as fully subordinated to the SBA loan, meaning your friend cannot receive any payments until the SBA loan is paid off, even if the interest rate is 0%.
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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