SBA loan basics
Short answer
Generally, no. Borrowed funds cannot be used for the required equity injection unless they are on "full standby" or meet specific, very limited exceptions.
Funds for the required equity injection must typically be unencumbered and come from the borrower's own resources, or from a gift with no repayment terms, or from seller financing on "full standby." Borrowed funds that require repayment during the term of the SBA loan are usually not allowed as equity because they create additional debt service, weakening the borrower's ability to repay the SBA loan.
If a borrower receives a $30,000 loan from a friend for their down payment, and this loan requires monthly payments, it would not count towards the equity injection. The lender would require the borrower to find other, eligible sources for their down payment.
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
FAQ Related to Recent SBA Procedural Notices
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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