Glossary · Your money in the deal
Hidden Equity Injection
In short
Funds that appear to be part of your required down payment but are actually financed by the seller or another third party without the lender's knowledge. This is strictly prohibited by the SBA.
What it means in a deal
The SBA requires your equity injection to be from unencumbered, seasoned funds. If the seller secretly finances a portion of your down payment, it's considered a hidden equity injection and can lead to the SBA denying the loan guaranty. All sources of funds must be disclosed and approved by the lender and SBA.
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 Hidden Equity Injection
- Can funds from a home equity line of credit be used for my equity injection?
- Can I use funds from a home equity line of credit for my 10% equity injection?
- How is 'sweat equity' or future services treated for an SBA 7(a) loan equity injection?
- Can a business's retained earnings count as equity injection?
- Is there a minimum cash portion for the equity injection?
- Are proceeds from personal investment sales eligible for equity injection?
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.
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