SBA loans usually require some money in the deal, called an equity injection or down payment. The good news is that it is often smaller than what a conventional lender wants. The exact figure depends on the program, the use of funds, and the lender.
Why lenders require it
An equity injection shows the lender you have skin in the game. A borrower who has invested their own money is more committed and has a cushion if things get tight, which lowers the lender’s risk.
7(a) down payment
For 7(a) loans, there is no single fixed percentage. For many uses, lenders look for around 10% equity, particularly for buying a business or a startup. Working-capital and some other uses may require less. Because the SBA guarantees part of the loan, requirements can be more flexible than conventional financing.
504 down payment
The 504 program has a more standard structure. A typical 504 deal is roughly 50% from a bank, 40% from the CDC and SBA, and about 10% from the borrower. That borrower share usually rises to about 15% to 20% for a startup or a special-purpose property (think a gas station or a hotel), because those carry more risk.
Where the down payment can come from
Down payment funds usually come from business or personal cash. In some cases, seller financing placed on standby, or gifted funds, can count toward the requirement, but this is governed by SBA rules and the lender’s judgment. Run your numbers with the loan calculator, and see which program fits with the eligibility checker.
Exact down payment requirements vary by lender and follow current SBA rules, so confirm the figure with a participating lender before you plan around it.