Glossary · Your money in the deal
Borrowed Equity
In short
This refers to funds borrowed from another source (not the SBA loan) to meet the SBA's equity injection requirement. The SBA has strict rules on what qualifies as "borrowed" and how it impacts the deal.
What it means in a deal
The SBA generally prohibits using borrowed funds for your equity injection unless those funds are on "full standby" and require no repayment for the life of the SBA loan. A home equity line of credit, for example, is typically not allowed unless it meets these strict standby requirements. Most buyers use unencumbered personal funds or a seller note on standby.
Official sources
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 — Lender and Development Company Loan Programs
U.S. Small Business Administration · SBA Standard Operating Procedure
Last checked 2026-06-15. Official sources control — verify before relying on any rule for a live deal.
Related terms
Common questions about Borrowed Equity
- Can personal funds borrowed against assets not being acquired count as my equity injection?
- Can personal funds borrowed from a credit union against personal assets count towards my equity injection?
- What are the eligibility requirements for funds borrowed from a third party to count as equity injection?
- Can funds borrowed against my personal brokerage account be used for the SBA 7(a) equity injection?
- Can I use borrowed funds from a personal unsecured loan for my equity injection if I commit to repaying it later?
- Can funds borrowed against my personal assets, like a home equity line of credit, be used for my SBA 7(a) loan down payment?
Defined by CapBench SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-15 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
Figure out your down payment and equity injection
Tell us your purchase price and how you're funding the down payment — we'll sanity-check the equity injection and show what lenders will actually accept.
Free · No documents · Usually same-day
Backed by data on 1,000+ SBA lenders and 300,000+ funded deals. Your details go only to lending partners you ask to be matched with — never sold to advertisers.