SBA 7(a) Q&A
Short answer
Prior owner debt converted to equity generally does not count as new equity injection for a change of ownership transaction.
The SBA considers equity injection to be new capital brought into the business by the buyer. Converting pre-existing debt from the seller to equity does not represent new money or assets injected into the business by the acquiring buyer.
If a buyer previously loaned the seller $50,000 and now wants to convert that debt into equity for a $500,000 business purchase, these funds would typically not qualify as the required new equity injection for the SBA loan.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
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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