SBA 7(a) Q&A
Short answer
No, funds obtained from a home equity line of credit (HELOC) generally cannot be used for the equity injection.
SBA policy prohibits the use of borrowed funds for equity injection unless the repayment of the loan used for the injection is clearly secondary to the SBA loan (full standby) and collateralized by assets other than those of the small business. HELOCs are typically not on such standby and are secured by the personal residence, making them ineligible.
A buyer wants to use $50,000 drawn from a HELOC for a $500,000 acquisition's down payment. The lender would inform the buyer these funds are not eligible as they represent borrowed money without proper standby or independent collateral.
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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