The Short Answer
For a business acquisition, the SBA generally requires a minimum equity injection of about 10% of the total project cost. On a $1,000,000 purchase, that's roughly $100,000 — far less than the 20% to 30% many conventional acquisition loans demand. And part of that 10% can sometimes be met with a seller note on full standby, reducing the cash you personally bring to closing.
Get a confidential consultation on finding, valuing, and financing the right acquisition — from a broker who works with buyers every day.
What Counts as the Equity Injection
The equity injection is the buyer's "skin in the game." It can come from:
- Your own cash — the most straightforward source
- A seller note on full standby — when the seller agrees to receive no payments for a set period (often two years), that note can count toward part of the required equity
- Investor or partner equity — capital from others taking a stake
- Certain retirement-account rollovers in some structures
This flexibility is why "10% down" doesn't always mean 10% of your own cash.
Why the SBA Down Payment Is So Low
Conventional acquisition loans often require 20–30% down because the lender bears all the risk on financing goodwill. The SBA guarantee changes the math: because the government backstops a large portion of the loan, the lender can accept a much smaller equity injection. That's the core reason SBA financing makes buying a business realistic for individual buyers — it dramatically lowers the cash barrier to ownership.
Down Payment Isn't the Only Cash You Need
Plan for more than the down payment. Buyers also need closing costs and fees (often financeable), working capital to run the business through transition, and a personal cash reserve for the first months. On a $1M deal, a prepared buyer might bring $150,000–$200,000 total to close comfortably while financing the balance — see how much money you need to buy a business for the full breakdown.
How to Lower Your Cash to Close
- Negotiate a standby seller note that counts toward the equity injection
- Finance working capital and closing costs into the loan rather than paying cash
- Bring in a partner or investor to share the equity
- Choose a business with clean cash flow that lenders finance easily
The caution: don't over-leverage. Lowering your cash is smart only if the business's cash flow still covers the debt with a real cushion.
Frequently Asked Questions
How much down payment do you need for an SBA loan to buy a business?
Generally a minimum equity injection of about 10% of total project cost. On a $1,000,000 purchase that's roughly $100,000, far less than the 20% to 30% many conventional acquisition loans require. Part of the 10% can sometimes be met with a seller note on full standby.
Can a seller note count toward the SBA down payment?
Yes. When a seller note is placed on full standby, meaning the seller receives no payments for a set period such as two years, it can count toward part of the buyer's required equity injection, reducing the cash the buyer brings to closing. The lender sets the rules for how it must be structured.
Why is the SBA down payment lower than a conventional loan?
Because the SBA guarantees a large portion of the loan, the lender's risk is reduced, so they can accept a much smaller equity injection, around 10% versus the 20% to 30% conventional acquisition loans often require. This is the core reason SBA financing makes buying a business accessible.
Is the down payment the only cash I need to buy a business?
No. Beyond the down payment you need closing costs and fees (often financeable), working capital to run the business through transition, and a personal cash reserve. On a $1M deal a prepared buyer might bring $150,000 to $200,000 total to close comfortably while financing the balance.
Wondering How Much You Need Down?
Martin Navarro helps buyers structure SBA deals to minimize cash without over-leveraging. Let's talk about your numbers, confidentially and with no obligation.
Request a Buyer Consultation Call or text: 818-633-3254 · 365navarro.martin@gmail.com