How much down payment does an SBA real estate loan need?
SBA 7(a) and 504 real estate loans typically require 10 percent down for an established business buying a general-purpose building, and 15 to 20 percent when the business is new, the property is special-purpose such as a hotel or car wash, or both. The down payment can come from cash, business funds, or documented gifts, and seller financing can cover part of it under specific rules.
The typical grid
| Situation | Typical down payment |
|---|---|
| Established business (2+ years), general-purpose building | 10 percent |
| New business (under 2 years) | 15 percent |
| Special-purpose property (hotel, gas station, car wash, self storage in some cases) | 15 percent |
| New business and special-purpose property | 20 percent |
| Business acquisition with real estate | 10 percent, with seller note allowed for part |
Ranges vary by lender and program year.
Where the money can come from
- Cash in personal or business accounts, seasoned.
- Gifts from family, with a gift letter.
- Retirement funds through a rollover structure or a documented withdrawal.
- Seller financing, on 7(a) business acquisitions, where a seller note on full standby for the loan term can count toward part of the equity injection.
- Home equity borrowed against your residence, if you can service the payment.
Borrowed money that must be repaid from the business generally does not count, because the SBA wants real equity at risk.
What the SBA calls equity injection
The down payment is called the equity injection. Lenders verify it with bank statements and want to see it in your account before closing, not arriving at the closing table from an unexplained source.
Closing costs and fees
SBA guarantee or funding fees vary by loan size and can usually be financed into the loan. Appraisal, environmental, title, and legal are paid at closing and typically run two to three percent of the project. Lenders will often finance closing costs on 504 projects within the 90 percent structure.
Ways the down payment moves
Up: thin business cash flow, a first-time owner, weak credit, or property with limited alternative uses.
Down: strong historical cash flow, a long operating history, a general-purpose building, and a lender with appetite for your industry.
A worked example
$2 million general-purpose building, established business. Under 504: bank first $1 million, CDC second $800,000, your $200,000. Under 7(a): $1.8 million loan, $200,000 down. If the business were 18 months old, the down payment moves to $300,000.
How CommFi handles it
Our lending desk reads the business, the property type, and your liquidity and prices the down payment before you make an offer. SBA loans fund through approved lenders, so the desk searches a database of 7,000+ lenders and puts the file in front of the ones active in your industry, and they compete. Zero upfront fees.
Related reading
Related questions
- How much down payment does an SBA loan need for a building?
- Ten percent for an established business buying a general-purpose building; 15 to 20 percent for a new business or special-purpose property.
- Can I use a gift for an SBA down payment?
- Yes, with a gift letter and documentation of the source.
- Can the seller finance part of the SBA down payment?
- On business acquisitions, a seller note on full standby can count toward part of the equity injection under SBA rules. Ask the lender.
- Can I use retirement funds for an SBA down payment?
- Yes, through a documented withdrawal or a rollover structure set up with a qualified provider.
- Are SBA fees included in the down payment?
- No. Guarantee fees are usually financed into the loan; appraisal, title, and legal are paid at closing and run two to three percent.
Property developer and licensed appraiser. 22+ years in real estate: TIC conversions, multi-unit redevelopments, mixed-use, fix and flips, commercial DSCR.