SBA Equity Injection Requirement: What Counts and How Much

Where the 10% rule applies

SBA requires at least 10% equity injection for 7(a) start-ups (businesses operating one year or less) and for business acquisitions; 504 projects have their own 10% to 20% contribution rule.

These rules come from SBA's lending procedures, SOP 50 10 8.1, effective October 1, 2026 (checked October 2026). In summary:

Loans that help an ESOP buy a controlling interest are not subject to SBA's equity injection requirement. Rules change, so confirm with your lender.

What counts as equity injection

Unborrowed cash, certain gifts, qualifying grants, verified prepaid project costs, non-cash assets at proper value, and debt placed on full standby can all count.

• Cash that is not borrowed. From the business balance sheet or the owner, including a documented gift.
• A personal loan only if it will be repaid from a source other than the business's cash flow. Your salary from the business does not count as that other source.
• Grants with no repayment or clawback during the life of the loan.
• Assets other than cash, such as equipment you contribute. If the value claimed is above net book value, an independent appraisal is required.
• Eligible prepaid expenses the lender verifies with paid invoices, cancelled checks or bank statements.
• Standby debt, meaning a loan that receives no principal or interest payments for the full term of the SBA loan.
• Outside equity investment that is not subject to an agreement to repay before the SBA guaranty is released.

What does not count

Borrowed money repaid from the business, fees paid to loan agents or advisers, and investments structured to be paid back early do not count.

• A HELOC or personal loan that you plan to repay from business profits or your owner's salary.
• Education costs, advisory services or fees paid to an agent who helped arrange the loan.
• Redeemable preferred stock or any "investment" that must be returned before the guaranty ends; SBA treats it as debt.
• Assets claimed at an inflated value without an independent appraisal.

Seller notes and other limited sources in an acquisition

In a change of ownership, seller financing and some other sources can count only if on full standby, and together they can cover no more than half of the required injection.

For business acquisitions, SBA's change-of-ownership rules split sources into two groups. Unlimited sources include unborrowed cash, qualifying personal loans to a guarantor, grants and verified prepaid expenses. Limited sources, including standby debt, seller debt on full standby and non-controlling minority equity investments, may together provide no more than half of the required injection.

Illustrative example: a buyer purchases a business with a total project cost of $1,000,000. The minimum injection is $100,000. At least $50,000 must come from unlimited sources, such as the buyer's own savings. Up to $50,000 could come from a seller note, but only if the seller agrees to receive no payments for the entire SBA loan term. For more on structuring a purchase, see buying a business with an SBA loan.

How lenders verify your injection

Except on SBA Express and Export Express loans, the lender must verify the injection before disbursing any loan proceeds and keep proof in the file.

Expect the lender to ask for:

• Bank statements showing the cash has been sitting in your account for a while, so they can see it is not freshly borrowed.
• A signed gift letter stating no repayment is expected, plus the donor's bank statement for gifted funds.
• Paid invoices and proof of payment for prepaid costs.
• Signed standby agreements, using SBA Form 155 or the lender's equivalent, with the note attached.
• Appraisals for contributed assets valued above book value.

Large unexplained deposits shortly before an application are a common reason for delays. Document the source of every significant deposit.

How to plan your equity contribution

Calculate the full project cost first, then build the injection from your strongest sources and leave a cash cushion after closing.

1. List every cost to complete the project: purchase price, equipment, build-out, closing costs, fees and opening working capital.
2. Multiply by your required percentage to set the minimum.
3. Fill it with unlimited sources first, then limited sources if allowed.
4. Keep separate reserves. Putting every dollar into the injection leaves nothing for the first slow month.
5. Season the cash in your account early so the paper trail is clean.

Our SBA loan calculator helps you size the loan after the injection.

If you are short on the injection

Shrink the project, phase it, bring in a minority investor, or look at financing that has no injection requirement for the parts that qualify.

ROI Funder does not place start-up loans for businesses under 6 months or acquisition loans. For established businesses with 6+ months of history and $20,000+ monthly revenue, equipment financing and working capital do not carry an SBA-style injection rule, which can cover parts of an expansion while the SBA piece is sized to the cash you have. Do not borrow your SBA injection from a short-term funder; SBA rules generally bar counting borrowed money repaid from business cash flow.