Glossary · Your money in the deal
Undisclosed Borrowed Equity
In short
Undisclosed borrowed equity refers to funds presented as a buyer's cash equity injection that were secretly borrowed, often from the seller or a related entity.
What it means in a deal
The SBA requires your equity injection to be unencumbered by debt. If you secretly borrow funds for your down payment, especially from the seller, it's considered undisclosed borrowed equity and will lead to loan denial. All sources of your equity must be fully transparent and meet SBA requirements.
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 Undisclosed 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.
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