The SBA 7(a) program requires a minimum 10% equity injection (down payment) from the buyer in a standard business acquisition. However, the practical down payment requirement is often higher depending on the business type, goodwill concentration, and individual lender requirements.
The 10% Minimum vs. Practical Reality
While 10% is the SBA minimum, many lenders require 15–20% for acquisitions where goodwill constitutes a large portion of the purchase price (as it does in most service businesses). Higher goodwill concentrations mean less tangible collateral securing the loan, which makes lenders less comfortable with the minimum equity injection. Buyers should plan for 15–20% down payment in most acquisition scenarios.
Seller Notes and Equity Injection
A seller note (seller-provided financing) on standby can count as equity injection in some SBA loan structures. For example, a buyer providing 10% cash down payment plus a 10% seller note on standby (not requiring payments for 2+ years) may qualify as a 20% equity injection for SBA purposes. This structure allows buyers to acquire businesses with less total upfront cash while still meeting SBA equity requirements.
Down payment funds must come from acceptable sources. Personal savings, gifts (with a gift letter), sale of personal assets, or 401(k)/IRA rollovers (through a ROBS structure) are generally acceptable. Borrowed funds used as down payment — personal loans, credit card advances — are not acceptable sources and must be disclosed accurately on SBA applications.