SBA 7(a) Q&A
Short answer
It depends. A loan secured by personal assets from a third party, if fully subordinated to the SBA loan, could potentially count as equity. However, the SBA prefers unencumbered cash.
Funds borrowed from a third party, even if secured by personal assets, generally do not count as equity if repayment is expected. For it to count, the loan would need to be on 'full standby' to the SBA loan, meaning no payments (principal or interest) could be made until the SBA loan is repaid in full. This effectively makes it 'equity-like' from the SBA's perspective.
A buyer takes a $75,000 loan from a family member, secured by a lien on their vacation home, specifically for the business acquisition. For this to count as equity, the family member's loan must be on full standby to the SBA 7(a) loan, meaning no payments can be made on the $75,000 until the SBA loan is repaid.
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 2026-06-13. 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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