What counts as an equity injection on an SBA 7(a) loan?

Seven sources count on a Standard 7(a) loan, starting with cash that is not borrowed. SOP 50 10 8.1, Sec. B, Ch. 1, Para. C.2.b, lists them, and the 7(a) Small section lists the same ones (Ch. 2, Para. C.2.a).

• Cash that is not borrowed, on the business's balance sheet or from other sources such as a gift.
• A personal loan repaid from a source other than the business's cash flow. Salary from the business does not qualify.
• Grants with no repayment or clawback provisions during the life of the 7(a) loan.
• Assets other than cash. Fixed assets valued above Net Book Value need an independent appraisal or valuation. A valuation inside a business valuation does not count.
• Eligible prepaid expenses, verified by paid invoices, canceled checks or bank statements. Education, advisory services and fees paid to an Agent do not count.
• Equity investments with no agreement to repay or recover the investment before the guaranty is released. SBA treats redeemable preferred stock of that kind as debt.
• Standby debt on full standby for the term of the 7(a) loan, with no payments of principal or interest.

Business purchases use a different list

Appendix 15 sorts sources into two groups (Para. C.2.a):

• Unlimited: cash, qualifying personal loans to a guarantor, grants and eligible prepaid expenses.
• Limited, no more than half of the required equity injection: standby debt, seller debt and non-controlling minority equity.

Assets other than cash are not on the Appendix 15 list. Money you spend on a required financial due diligence report can count toward equity (Para. C.1).