SBA loans
How Much Is the Down Payment on an SBA Loan?
Usually 10% — and sometimes nothing at all. Whether you need a down payment on an SBA loan depends on what the money is for. Here is the 2026 equity injection rule for 7(a) and 504 loans, what counts as equity, where seller financing fits, and how to document it so underwriting does not stall.
Do SBA Loans Require a Down Payment?
It depends on the use of funds. For working capital, equipment, inventory or expansion loans to an existing business, a 7(a) loan usually requires no down payment. For a start-up or a business purchase, the SBA requires an equity injection of at least 10% of total project cost, a rule restored in June 2025 that cannot be waived on a first-time acquisition. For an SBA 504 real estate or equipment loan the borrower contributes 10%, rising to 15% for a start-up or a special-purpose property and 20% if both. The SBA calls it an equity injection rather than a down payment because it can come from several sources, not just cash.
Down Payment by Loan Purpose
| Use of funds | Program | Required equity injection | Notes |
|---|---|---|---|
| Working capital, inventory, refinancing (existing business) | 7(a) | Usually none | Lender may still want to see liquidity |
| Equipment or vehicles (existing business) | 7(a) | Usually none | Lender may ask for 10% on large purchases |
| Expansion of an existing business | 7(a) | 10%, but the lender can reduce or waive it if liquidity and working capital are adequate and net worth was not negative at the last fiscal year end | Rule under SOP 50 10 8.1 |
| Start-up (one year or less of operating revenue) | 7(a) | At least 10% of total project cost | Cannot be waived |
| Buying a business (initial acquisition) | 7(a) | At least 10% of total project cost | Cannot be reduced or eliminated; standby seller note may cover up to half |
| Partner buyout (owner buyout) | 7(a) | 10% of the purchase price, waivable if debt-to-worth is 9:1 or better | Lender discretion within SBA rules |
| Real estate or heavy equipment | 504 | 10% | 15% for start-ups or special-purpose property; 20% if both |
| Employee stock ownership plan buying 51%+ | 7(a) | None required by SBA | Cooperatives need 10% |
Who funds a typical $1,000,000 business purchase under the 2026 rules
The SBA requires 10% total equity. Limited sources — a seller note on full standby, other standby debt, and minority investors under 20% — may make up no more than half of it combined.
What Counts as Equity
The SBA is specific about where the 10% can come from, and the 1 October 2026 SOP tightened the list.
- Cash from the buyer, seasoned in an account for a period the lender can verify (most ask for two to three months of statements).
- Assets contributed to the project at verified value, such as owned equipment or real estate going into the deal.
- Gifts with a signed gift letter and proof the giver had the funds.
- Retirement funds via a ROBS (Rollover for Business Start-ups) structure or a documented withdrawal.
- A home equity loan or other personal borrowing, provided the lender confirms you can service it from income outside the business.
- Standby seller financing, counted only if the note pays no principal or interest for the full term of the SBA loan, and only up to half of the required injection when combined with other limited sources.
- Non-controlling minority investors holding under 20%, also limited to the half-of-injection cap.
Why the SBA Brought the 10% Back
Between 2023 and mid-2025 the SBA allowed lenders to set their own equity requirements on 7(a) loans, and many business purchases closed with little or no buyer cash. Default rates on those loans rose. SOP 50 10 8, effective 1 June 2025, restored a hard 10% floor on start-ups and complete changes of ownership, and SOP 50 10 8.1, effective 1 October 2026, added the 1.25x historical cash-flow test on acquisitions and barred seller earn-outs. The practical effect: buyers need real cash in 2026, and deals are sized to what the business has already earned, not to projections.
How the Numbers Work on a Business Purchase
Total project cost is not just the purchase price. It includes working capital, closing costs, the SBA guaranty fee if financed, and any equipment or inventory bought at closing. The 10% applies to that total.
| Item | Amount |
|---|---|
| Purchase price | $850,000 |
| Working capital at closing | $75,000 |
| Closing costs and packaging | $25,000 |
| SBA guaranty fee (financed) | $25,000 |
| Total project cost | $975,000 |
| Required equity injection (10%) | $97,500 |
| Of which, at least half in buyer cash | $48,750 |
| Of which, up to half as standby seller note | $48,750 |
| SBA 7(a) loan | $877,500 |
Illustrative. Your lender will also test whether the business’s last fiscal year (or two-year average) covers the $877,500 loan’s payments at 1.25x. If it does not, the fix is more equity, a lower price, or a longer term — see what to do if an SBA file is declined.
If You Do Not Have the 10%
- Negotiate standby seller financing for up to half of the injection. Many sellers accept a note that starts paying after the SBA loan is retired, especially on deals that would not otherwise close.
- Bring in a minority partner under 20% ownership; their cash counts within the half-of-injection limit.
- Use retirement funds through a ROBS, with a provider who has done it for SBA closings before.
- Lower the project cost. A smaller working-capital draw at closing reduces the 10% you need.
- Switch the use of funds. If the real need is working capital for a business you already own, a 7(a) usually needs no injection at all.
- Build the cash with a non-SBA product. Owners sometimes fund growth now with a term loan or line of credit, accumulate the equity, and buy with SBA financing a year later.
Documenting the Injection So Underwriting Does Not Stall
- Two to three months of statements for every account the cash comes from.
- A written explanation and backup for any large recent deposit.
- The executed standby agreement for any seller note, on the SBA’s standby form.
- Gift letters, ROBS plan documents, or the home equity loan closing statement where those apply.
- Proof the injection is in escrow or in the business account before the SBA loan funds — the lender must verify it before disbursement.
Missing injection documentation is one of the most common causes of a two-week delay late in the process. See how long an SBA loan takes and the full SBA loan requirements.
Common Questions
Can you get an SBA loan with no money down?
For working capital, equipment and refinancing loans to an existing business, often yes: the SBA does not require an equity injection on those uses. Start-ups and business purchases require at least 10% of total project cost, and that cannot be waived on a first acquisition.
Can seller financing count as the SBA down payment?
Partly. A seller note counts toward the 10% only if it is on full standby (no principal or interest payments) for the life of the SBA loan, and standby notes plus other limited sources may cover no more than half of the required injection.
Is the SBA down payment 10% or 20%?
For 7(a) start-ups and business purchases it is 10% of total project cost. For a 504 loan it is 10%, rising to 15% for a start-up or a special-purpose property and 20% when both apply. Individual lenders can ask for more.
Can I borrow the down payment for an SBA loan?
Personal borrowing such as a home equity loan can work if the lender confirms you can repay it from income outside the business. Money the business itself will repay does not count as equity.
Does an SBA loan for equipment need a down payment?
Usually not for an established business, though a lender may ask for 10% on a large purchase. An SBA 504 equipment loan requires the standard 10% borrower contribution.
Sources
- SOP 50 10 8 summary of changes — Grasshopper Bank
- SOP 50 10 8.1 changes effective 1 October 2026 — StatementsReady
- 504 loan program — U.S. Small Business Administration
- 7(a) loan program — U.S. Small Business Administration
See What You Qualify For
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