Will SBA Lenders Work With Me If My Equity Injection Comes From a Personal Loan?

searcher profile

April 22, 2025

by a searcher from Arizona State University in Chicago, IL, USA

I’m looking to acquire a business valued up to $4m. I have recently been pre-approved for a personal unsecured loan up to $550k that I intend to use as my equity injection. The funds will be deposited into my business bank account from my personal bank as a "capital contribution" to demonstrate liquidity. I’ve heard mixed opinions on whether SBA lenders will accept this structure. Some say it’s fine as long as I can show repayment ability without the use of the business and that it is capital contribution, while others mention it must be “unborrowed funds.” Has anyone successfully used a personal loan as their SBA down payment? And are there specific lenders or SBA-friendly banks who are more open to working with this setup? Would really appreciate any insights or introductions. Thank you!
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Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
You are not supposed to use borrowed funds as your down payment for an SBA loan with the exception being funds from a home equity loan, so long as you can prove you can service the home equity loan from business or personal cash flow. If it is a personal loan, that is not going to be allowed. Banks are going to typically look back 60 to 90 days to source all funds you plan to use for your downpayment. Any funds that come into your accounts during that period that you plan to put down, they are going to want to source where that money came from. If you have other personal debts, those are going to factor into what type of draw you need to take to support a business acquisition. If you borrow $550,000 personally, I would assume your required monthly payment is going to be pretty high. Just keep in mind personal debts, living expenses, real estate taxes, mortgages, income taxes, rent, etc. need to be supported by cash flow on SBA loans. If you have additional questions I would be happy to have a discussion. You can reach me here or directly at redacted
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