SBA 7(a) Q&A
Short answer
The value of inventory contributed as equity injection is typically assessed at the lower of its cost or market value, and must be unencumbered.
SBA rules allow unencumbered business assets, including inventory, that are owned by the borrower and contributed to the acquired business to count towards the equity injection. The valuation must be supported by appropriate documentation, such as invoices or a professional appraisal, and the inventory must be essential for the business's operations and free of any liens.
A buyer needs a $50,000 equity injection. They contribute $30,000 worth of unencumbered inventory from a related business they own, which is verified by invoices. They then add $20,000 in cash.
Insider move
Lenders will require documentation (e.g., invoices, inventory lists, appraisal) to verify the inventory's value and confirm it is unencumbered. They also assess if the inventory is suitable and necessary for the acquired business.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 - Lender and Development Company Loan Programs
Last checked 2026-06-14. 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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