Glossary · underwriting

Equity injection

Also called borrower injection, down payment, cash injection.

The borrower's own money going into a transaction alongside the loan, required by SBA on startups and changes of ownership and by most lenders on equipment and real estate.

Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.

What it means

The requirement exists so the borrower has something to lose. On SBA files the minimum percentage, what may count toward it, and how it must be documented are set in the agency's SOP and change between revisions, so the current version governs rather than what a lender did last year.

Sources that generally count, with documentation

  • Verified cash, traced through statements over a period rather than appearing the week before closing
  • A gift, supported by a letter confirming it is not repayable
  • Retirement funds through a properly structured rollover
  • Home equity, where the borrower can service the payment from income outside the business
  • A seller note, but only on full standby meeting the program's conditions

Borrowed money generally does not count unless it is repayable from a source other than the business's cash flow. The lender will trace it.

Where this one catches people

Standby has a technical meaning: no payments of any kind, not interest, for the required period, documented on the agency's standby form. A seller note paying interest during standby usually fails to count toward the injection, and this is discovered late, when the structure is already agreed and the closing date is set. Confirm how the seller note will be treated before the LOI is signed.

Where you will meet this term

Term Loan SBA Loan Equipment Financing

Read next

Change of OwnershipA transaction in which the ownership of a business changes hands — financed as an acquisition loan on the tar… SBA 7(a) loan (7(a))The SBA's main guaranteed loan program, usable for working capital, equipment, real estate, business acquisit… Seller noteA promissory note the seller of a business accepts as part of the purchase price, paid out of the acquired bu… Source of Funds (SOF)Evidence of where money came from — an equity injection, a large deposit, a gift, a rollover — required by le… Standby agreementA written agreement in which a creditor agrees to take no payments and pursue no collection for a defined per…

Equity injection — common questions

What does equity injection mean?

The borrower's own money going into a transaction alongside the loan, required by SBA on startups and changes of ownership and by most lenders on equipment and real estate.

Where does equity injection catch people out?

Standby has a technical meaning: no payments of any kind, not interest, for the required period, documented on the agency's standby form. A seller note paying interest during standby usually fails to count toward the injection, and this is discovered late, when the structure is already agreed and the closing date is set. Confirm how the seller note will be treated before the LOI is signed.

Is equity injection the same as an interest rate?

Equity injection is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.

Which products does equity injection apply to?

Term Loan, SBA Loan, Equipment Financing.

Is there a worked example of equity injection?

Not on this entry. Where a term is arithmetic, the arithmetic is shown; this one is not primarily a calculation.

What else should I read alongside equity injection?

Change of Ownership, SBA 7(a) loan, Seller note, Source of Funds, Standby agreement.

Has this definition been checked?

Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.

Is this legal advice?

No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.

Can I suggest a term?

Yes — [email protected]. The glossary grows from what people are actually shown in contracts.