SBA Loan Down Payment Guidelines

Written by Jill A. Chafin +2 more

Written by Katie Lowery +1 more

Edited by Dawn Daniels

SBA down payment requirements vary based on the lender and the loan type. While the SBA requires a minimum down payment of 10% on certain loans, down payment requirements are more often set by individual lenders. These down payments may reach as high as 30% for startups and businesses seen as high-risk. 

Though some SBA loan programs require no down payment at all, providing one can often unlock lower interest rates and more flexible repayment terms.

SBA loan down payment requirements

Backed by the Small Business Administration (SBA), the SBA loan program provides funds to help small business owners tackle a range of business expenses. While the SBA imposes certain guidelines, such as capped interest rates and terms, you must apply directly through an SBA-approved partner lender like a bank, credit union or online lender. 

Lenders typically determine your SBA down payment, also called an equity injection, based on the loan type, the company’s age and cash flow and the value of any collateral you’re providing. Though down payment requirements can vary between lenders, here’s a breakdown of what you could expect to pay based on the minimums set by the SBA.

SBA 7(a) loan down payments

Your down payment for most 7(a) loans can be anywhere from 0% to 30% or higher, depending on the lender you choose.

The SBA requires at least a 10% down payment on loans over $500,000 if the loan proceeds are being used to cover a change of ownership. In all other cases, the SBA does not set a minimum equity injection for 7(a) loans. 

However, individual lenders are allowed to enforce their own down payment requirements, as long as the required amount is in line with what is required for similarly-sized, non-SBA loans. 

While some lenders may only require a down payment of 10%, a higher down payment may be required for businesses seen as high risk, such as those with lower credit scores or fewer years in business. Most lenders will not ask for a down payment that exceeds 30% of the loan amount.

SBA 504/CDC loan down payments

Business owners should expect to pay a minimum down payment of 10% for an SBA 504/CDC loan, with some businesses needing to provide up to 20%. 

The 504 down payment requirements are a little different. You can contribute cash or property/land — though if you contribute property or land, it may need to be approved by the SBA, purchased with cash and/or be part of the property you’re developing. 

Because the rules get more complicated here, you’ll want to talk with your lender about the requirements if you plan to use anything besides cash as a down payment.

SBA CAPLine down payments

Your down payment for most CAPLine financing can be anywhere from 0% to 30% or higher, depending on the lender you choose.

CAPLines fall under the SBA 7(a) loan umbrella, so there isn’t a down payment requirement set by the SBA. 

But individual lenders can require a down payment in line with what they’d charge for non-SBA loans. This often falls in the 10% to 20% range, though some lenders could charge 30% or higher. Your credit score, time in business, collateral and the lender you choose may affect what down payment is required.

How to get a down payment for an SBA loan

Lenders typically require a down payment for a small business loan because they want the business owner to have “skin in the game.” Here are some ways to fund your SBA down payment.

Personal savings

If you have enough cash reserves, you can use your personal savings to cover the down payment. 

Angel investors

In some cases, asking an investor to cover the down payment can work. Angel investors are typically high-net-worth individuals who can help provide startup financing. Instead of fronting the entire loan amount, you can negotiate for the angel investor to cover only the down payment. In return, some angel investors may negotiate to own a percentage of your company.

Trim expenses

If your business is already operating, you can review your business budget for ways to cut costs. Working with independent contractors, for example, can be a less costly alternative to a full-time employee who is paid salary plus benefits. 

You can also scale back on variable costs, such as using Zoom for meetings to save on time, travel and transportation costs.

Using your 401(k) savings or Rollover as Business Startup Plan

Owners of C corps can turn to their retirement savings plans to cover a loan down payment. A rollover as a business startup (ROBS) plan allows you to invest the funds in your retirement account, such as your 401(k) or traditional individual retirement account (IRA). 

Under a ROBS plan, you are not withdrawing from your retirement funds — instead, the funds are rolled into another account, which buys shares in your corporation. For this reason, a ROBS plan is available only to C corporations since this business structure enables a company to sell stock.

While a ROBS can provide access to the funds needed for a down payment, some drawbacks are worth noting. Depending on the down payment you need, you could risk investing a significant portion of your retirement savings. If your business fails, you might lose your future retirement security. Also, setting up, administering and maintaining your ROBS could come with additional fees, which could end up making this a costly option.

SBA loans with no down payment

The following SBA loan programs typically don’t require a down payment or collateral. While an unsecured business loan could be ideal for business owners lacking financial resources, lenders may place more weight on other requirements for an SBA loan, such as a sound business plan and strong financial statements.

SBA microloans

As the name suggests, SBA microloans offer small loans up to $50,000 with no down payment required. Similar to the 7(a) loan, you can use microloans for general financing, including working capital, inventory, furniture and equipment. The maximum term is 84 months. Interest rates are negotiable between the business owner and intermediary, typically ranging from 8.00% to 13.00%.

Some SBA microlending institutions don’t enforce a minimum credit score, making this loan program ideal for business owners with little to no credit history. Business owners should have a robust business plan with cash flow projections over the next 12 months before submitting a microloan application.

SBA Express Loans

While most SBA loans can take several months to process and fund, the SBA Express Loan offers an accelerated turnaround of approximately 36 hours. If approved, you can borrow up to $500,000 as a term loan or line of credit to use toward a range of business expenses. Terms go up to 120 months for working capital and business acquisitions or 25 years for commercial real estate.

The interest rate for SBA Express Loans is similar to SBA 7(a) loans, with a maximum of the current prime rate plus 6.5%. You typically don’t need to provide collateral or a down payment for SBA Express Loans below $50,000.

SBA disaster loans

The SBA extends financing to small businesses affected by declared disasters through SBA disaster loans. Business owners within declared disaster areas may qualify for the SBA Economic Injury Disaster (EIDL) loan if their companies have suffered a significant economic injury. Declared disaster areas are affected by natural disasters, such as hurricanes and wildfires. EIDLs offer up to $2,000,000 in funds with an interest rate at or below 4.00% and repayment terms up to 360 months. Eligible expenses include working capital, rent and health care benefits.

Businesses in declared disaster areas can apply for a physical damage loan up to $2,000,000 to help repair or replace damaged property. The SBA enforces a maximum interest rate of 4.00% to 8.00%, depending on whether you can obtain help without SBA assistance. Some business owners may qualify for mitigation assistance financing on disaster-prevention projects — installing hurricane roof straps or storm shelters, for instance.

Note that the EIDL program may require some collateral for loans over $50,000.