Equity injection

Definition

The buyer's own cash in an SBA deal, the part no loan covers.

Why It Matters

It is the lever that turns your savings into a maximum purchase price: at a 10% requirement, every dollar of injection supports about ten dollars of deal. On an outright purchase no lender can reduce it; only an owner buyout or a business expansion may have it reduced or waived. Run that math backward, from the cash you actually have to the largest business you can finance, and it is the first reality check on any target. Then comes the question everybody asks second, which is whether the cash can be borrowed, and the loan program's own rules answer it in a line. A personal loan counts only when it is made to a guarantor and repaid from a source other than the business's cash flow, and the salary the business pays you is named as not qualifying. Seller debt counts only subordinated to the lender and on full standby for the life of the SBA loan, and seller notes, other standby debt and minority investors' money together cover at most half the required injection. Edition 8 named search funding in a rule treating investor money as debt when the paper let investors recover it early. Edition 8.1 drops those words and limits the money instead: investor equity counted toward the injection takes only tax distributions until the loan is repaid. A minority investor's, under 20% with no control, may carry no agreement to repay it before the guaranty is released. What you spend on the valuation and the financial due diligence reports counts toward the injection too.

In numbers: At a 10% injection, $400k of cash supports up to a $4M total project; the same math run backward is how the SBA Calculator turns savings into a maximum price.