SBA 7(a) Q&A
Short answer
Funds borrowed from a third party can count as equity injection if the third-party loan is on full standby, fully subordinated to the SBA loan, and does not put the business in an undue debt position.
The SBA allows third-party debt to qualify as equity injection if it is fully subordinated to the SBA loan, meaning no payments of principal or interest are made until the SBA loan is repaid. This demonstrates a true equity-like commitment from the third-party lender.
If you receive a $75,000 loan from a private investor for a $1,000,000 acquisition, this can count towards your 10% equity injection if the investor agrees to a subordination agreement prohibiting payments for the 10-year SBA loan term.
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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