SBA loan basics
Short answer
Equity injection can include cash, assets valued at fair market value, or certain types of seller financing placed on 'full standby.' It must be unencumbered and from an eligible source.
The SBA permits various forms of equity injection. Cash from personal savings is common. Other forms include unencumbered business assets (like equipment or real estate) contributed at fair market value, or a seller note that is on 'full standby' (meaning no payments of principal or interest are made until the SBA loan is fully repaid). Gifted funds from eligible sources can also count.
For a $500,000 project, a borrower might contribute $30,000 cash, $20,000 worth of unencumbered equipment they already own, and the seller might agree to carry a $50,000 note on full standby, totaling $100,000 (20% equity).
Insider move
Lenders must rigorously verify the source, amount, and unencumbered status of all equity injections. For non-cash assets, an independent valuation is often required. For seller notes, strict documentation of the full standby agreement is crucial.
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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