SBA loan basics
Short answer
No, generally a personal loan from a relative cannot be used for the equity injection (down payment) for an SBA 7(a) loan unless it is placed on full standby for the entire term of the SBA loan.
Any funds used for equity injection must typically be unencumbered and not subject to repayment during the life of the SBA loan. A loan, even from a relative, creates a debt obligation. To qualify, such a loan would need to be formally subordinated to the SBA loan and placed on "full standby," meaning no principal or interest payments can be made until the SBA loan is fully repaid.
David receives a $75,000 loan from his uncle for his equity injection. The lender informs David that this loan cannot count unless his uncle signs a full standby agreement, legally prohibiting any payments to the uncle until the SBA 7(a) loan is paid off.
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
SBA Form 1919 - Borrower Information Form
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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