SBA loan basics
Does a loan from a relative count towards my required down payment?
Short answer
It depends, but a loan from a relative can count towards your down payment if it's on 'full standby' terms, meaning no payments are made until the SBA loan is repaid.
The rule
For a loan from a relative (or any third party) to count as equity, it generally must be on 'full standby.' This means the relative agrees to make no principal or interest payments for the full term of the SBA loan, or at least until the SBA loan is fully repaid. This ensures that the business's cash flow is not diverted to service this additional debt and protects the senior position of the SBA-guaranteed loan.
Facts that matter
- Full standby required
- No payments to relative
- SBA loan priority
- Cash flow protection
- Subordination agreement
Example structure
A business owner needs $20,000 for their down payment and borrows it from a parent. If the parent signs a standby agreement stating they will not receive any payments until the SBA loan is fully satisfied, then the $20,000 counts as equity. If the parent expects monthly payments, it would not count.
What lenders usually care about
Official sources
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
Last checked 2026-06-14. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-14 · SBA sources checked through 2026-06-14. 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.
More on down payment & equity injection
- Can I use retirement funds from a 401(k) as equity injection for a $750,000 business purchase?
- Can funds from a home equity line of credit (HELOC) be used as my equity injection for a business acquisition?
- Is it possible to use a second mortgage on my personal residence as an equity injection for a $1.5 million business acquisition?
- How much cash must I personally inject for an SBA 7(a) business acquisition?
- What are the acceptable sources for my cash equity injection beyond personal savings?
- What is the SBA's minimum required equity injection percentage for a business acquisition?
Terms in this answer
AI summary
This page answers “Does a loan from a relative count towards my required down payment?” for SBA 7(a) business buyers — a short answer, the detail, and official sources — from CapBench SBA Intelligence. It is general information, not legal, tax, or financial advice, and CapBench is not a lender.
Source: CapBench SBA Intelligence, based on public SBA, lender, franchise, FDIC, and related records. CapBench is not a lender and does not guarantee financing.
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