Had a great question from an investor last week, and honestly not one that I'd ever considered.

Question is how to SBA 7A lenders view revenue based financing in acquisitions, when revenue based financing is used to complete the equity injection into the business?

For instance, let's say you're acquiring a business for $5M that has $1M in EBITDA. To complete the deal, the SBA requires a 10% equity injection. One of your investors has agreed to lend you $1M ($500k toward a down payment, and $500k toward working capital), but wants to structure it as revenue based financing which you repay from a % of future revenues.

Would the lender see this as an equity injection given its subordinate to the 7A debt? Would it count against the debt service coverage ratio (since it is payable upon growth and would be paused if revenue declines or dips), etc?