"If the lender sells the equity into the public market in short order, the lender will be considered an underwriter, who may not be licensed to be an underwriter, let alone considered to be issuing unregistered stock."

Section 3 of the Securities Act of 1933 that deals with exceptions to normal equity underwriting requirements. Specifically, section 3(a)(10) deals with paying with equity for claims against the borrower. It allows these transactions with some conditions. So that not every equity offering doesn’t goes through this exception, the SEC allows the lender to sell the securities as a payment after holding onto it for at least three months.

For practical purposes, if you are a lender who wants to take advantage of this, selling the shares on the first day of the fourth month is a bad idea. Lenders who are interested in doing this have taken to doing it around six months. So, lenders are taking a risk for six months and hope that the company survives at least that long. SEC sees this as holding the securities long enough to be taking on a credit risk.

https://moneycompliance.com/tag/sec/