How Much Down Payment Do You Need to Buy a Business With an SBA Loan?

It's almost always the first question a buyer asks: how much cash do I actually need to bring? You've found a business worth buying, the numbers look good, and the only thing between you and ownership is figuring out the check you have to write at closing.

The honest answer is that the SBA sets a floor, and then the lender — and your specific deal — decides how far above that floor you land. Here's how to think about it. As always, FTI Capital is a broker and advisor: we don't lend the money. We structure the deal, tell you what a lender will actually accept, and take your package to the SBA lenders most likely to fund it.

The 30-second version

Where the down payment number comes from

Two separate things are going on, and conflating them is where buyers get surprised.

1. The SBA's floor. SBA rules require a minimum equity injection on a change-of-ownership deal. It's a percentage of the total project cost — not just the purchase price — so closing costs, working capital, and any fees rolled into the loan all count toward the base the percentage is calculated on.
2. The lender's overlay. Every SBA lender adds its own credit policy on top of the SBA's minimum. One lender may be comfortable at the floor for a business with a decade of clean, stable earnings; another wants more skin in the game before it will touch the same deal.

This is why two buyers looking at similar businesses can get told two very different numbers. It isn't inconsistency — it's different lenders' appetites. Knowing which lender to approach with which deal is most of the value a broker adds.

What counts toward your equity injection

"Down payment" is shorthand. What lenders are really testing is your equity injection — money in the deal that isn't the SBA loan and isn't repaid out of the business's near-term cash flow. Sources that commonly qualify:

• Your own cash and liquid savings — the cleanest and easiest to document.
• Seller financing on full standby — a note from the seller with no payments for a defined period. Structured correctly, this can commonly cover a meaningful share of the required injection, and it's the single most useful tool for a buyer who's short on cash.
• Outside investor or partner equity — real equity, not a disguised loan. Anyone taking a large enough ownership stake will typically be brought into the guaranty.
• Gifted funds from family, properly documented as a gift rather than a loan.
• Retirement funds rolled in through a qualifying structure — workable, but the mechanics and the risk deserve a conversation with your CPA first.
• Home equity or a personal loan, in some cases — but only where you can service it from income outside the business, and lenders will look closely.

What usually doesn't count

• Borrowed money repaid from business cash flow. If the business has to make the payment, it isn't equity — it's more debt, and it works against you in underwriting.
• A seller note with immediate payments. The standby is the whole point; a note that starts amortizing right away generally won't count toward the injection.
• Undocumented cash. If you can't source and season it in your statements, assume a lender won't credit it.
• The SBA loan itself, including any working capital rolled into it.

Why a lender might want more than the minimum

The minimum is a floor, not a target. The factors that push a lender to ask for more:

1. Thin or volatile cash flow. If debt service barely clears the business's earnings, more equity means a smaller loan and a safer coverage ratio.
2. A goodwill-heavy purchase. When most of the price is the brand, customer list, and earnings rather than hard assets, there's less collateral to fall back on.
3. No industry experience. Buying a business in a field you've never worked in is the most common reason a buyer gets asked for extra equity.
4. A stretched valuation. If the appraisal or business valuation comes in under the agreed price, the gap generally lands on the buyer.
5. Post-close liquidity. Lenders want you to still have reserves after closing. Draining every account to hit the minimum is its own red flag.

Practical ways to close a down-payment gap

If you're short, the deal isn't necessarily dead. The moves that actually work:

1. Negotiate a standby seller note. Motivated sellers are often more flexible here than buyers expect, and it's usually the highest-leverage change you can make to a deal's structure.
2. Bring in a partner with real equity — and go in clear-eyed about the ownership and guaranty consequences.
3. Re-cut the structure. Adjusting what's financed, how much working capital is rolled in, or how the purchase is allocated can move the required injection.
4. Take it to a different lender. Same deal, different credit box. This is the fix people overlook most often, because most buyers only ask their own bank.
5. Wait a quarter and build reserves. Not the answer anyone wants, but a stronger balance sheet at application often beats a rushed, thin one.

What to have ready before you apply

• Two to three months of statements for every account holding your injection funds.
• A clear source for every dollar — payroll savings, an asset sale, a gift letter, an investor's commitment.
• The letter of intent or purchase agreement, including any seller-note terms.
• Three years of the target's financials and tax returns, plus interim statements.
• Your own personal financial statement and tax returns.

Buyers who arrive with this organized get faster answers and better terms, for the simple reason that underwriting has less to guess about.

How this works with FTI

1. Consult. A free call to look at the deal and your available equity, and to give you a straight read on what a lender will realistically require.
2. Structure & package. We shape the injection — including any standby seller note — and build a lender-ready package.
3. Match & close. We take it to the SBA lenders in our network whose credit appetite fits your specific deal, then manage underwriting through to closing.