SBA 7(a) Q&A
Short answer
Investor funds can count as equity if the investor is a passive third-party, but they cannot hold an ownership interest of 20% or more without providing a personal guaranty. Clearly structured debt or non-voting equity below 20% are common solutions.
SBA rules require any individual owning 20% or more of the equity in the borrower business to provide a full personal guaranty. If an investor provides funds for the down payment and takes less than a 20% equity stake, they typically do not need to guarantee the loan. Alternatively, the investor could provide a fully subordinated loan to the business, which can count as equity, without taking an ownership position.
An investor contributes $150,000 for a $1.5 million business acquisition, representing 15% of the total equity injection. Since this is less than 20%, the investor would not be required to provide a personal guaranty, assuming no other factors trigger it.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 - Lender and Development Company Loan Programs
SBA Form 1919 - Borrower Information Form
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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