SBA Loan Down Payment: How Much Is Required?

SBA loan down payment amounts vary based on the lender, loan type and qualifications, with many lenders requiring a minimum of 10% — or up to 30% for startups. While some SBA loan programs require no down payment, providing one can often unlock lower interest rates and more flexible repayment terms.

Learn more about SBA loan down payments and how they differ for each SBA loan program.

SBA loan down payment requirements by loan type

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.

An SBA down payment, also called an equity injection, is typically based on the loan type, your company’s cash flow and the collateral’s value. Here’s a breakdown of what you could expect to pay when getting an SBA loan.

SBA 7(a) loans

The down payment requirement on the popular SBA 7(a) loan generally starts at 10% but can go up to 30% for new businesses and startups. With funds up to $5,000,000, business owners can use the proceeds for inventory, working capital, machinery, commercial real estate and more.

The maximum fixed interest rate on a 7(a) loan is based on the current prime rate (8.5%) plus 6.5%, for a capped rate of 15%. Repayment terms can range from 10 to 25 years, depending on how you use the funds. For example, SBA working capital loans must be repaid within ten years, whereas you could take up to 25 years to repay a commercial real estate loan.

The SBA uses the FICO Small Business Scoring Service (SBSS) when reviewing SBA 7(a) loan requirements. The minimum SBSS score is 155 for loans up to $350,000 as of Feb. 5, 2024. The score is based on multiple factors, including credit score and financial information.

SBA 504/CDC loans

Business owners should expect to pay a minimum down payment of 10% for an SBA 504/CDC loan, with startups typically needing to provide up to 20%. Loan amounts can go as high as $5,500,000, allowing you to finance major fixed assets, such as equipment and commercial real estate. Repayment terms go up to 120 months for equipment financing or 300 months for commercial real estate loans.

Alongside your 10% down payment, 40% of the loan amount is funded by a Certified Development Company (CDC) and 50% from a third-party lender. Interest rates on the third-party lender portion can be fixed or variable and are negotiable. The CDC portion’s interest rates are pegged to five- and 10-year Treasury notes.

SBA 504/CDC loans must follow specific SBA loan requirements, such as business owners needing to create or retain a job per $75,000 borrowed (or $120,000 for small manufacturers) and meet the SBA size guidelines. Your business’s cash flow will likely play a significant role during the underwriting process.

SBA CAPLines

CAPLines fall under the SBA 7(a) loan umbrella, requiring a similar down payment of 10% to 30%. With an SBA line of credit, you can draw up to your set limit, repay the debt and draw again as often as needed. Credit limits go up to $5,000,000, with repayment terms capping at 60 to 120 months, depending on the type of CAPLine. All SBA CAPLines come with capped interest rates — currently prime rate (8.5%) plus 6.5%, or 15%

There are four types of CAPLines available:

• Seasonal CAPLine: Can help with seasonal fluctuations in revenue, such as covering payroll or inventory costs.
• Contract CAPLine: Ideal for contract-related expenses, such as overhead or administrative expenses.
• Builders CAPLine: Can help finance general contractors or rehabilitate property for resale.
• Working CAPLine: Similar to a working capital line of credit, you can use funds for short-term and unexpected expenses, as well as covering recurring debts.

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 bootstrap your business and 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’s paid salary plus benefits.

You can also scale back on variable costs, such as using Zoom to save on time, travel and transportation costs. And yet another way to boost your down payment savings is to sell off personal items with a good resale value that you no longer need, such as a car or fitness equipment.

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

Business owners 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 into 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 required 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 six years. Interest rates are negotiable between the business owner and intermediary, typically ranging from 8.00% to 13.00%.

The SBA microloan program primarily serves business owners from underserved markets, including women-owned businesses and minority entrepreneurs. 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 10 years 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 prime rate (8.5%) 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 can be affected by natural disasters, such as hurricanes and wildfires. EIDLs offer up to $2,000,000 in funds with a 4.00% interest rate 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 8.00% with lengthy repayment terms of up to 360 months. Some business owners may qualify for mitigation assistance financing on disaster-prevention projects — installing hurricane roof straps or storm shelters, for instance.

Business owners with low credit scores (high 500s and up) can qualify for certain disaster loans. Note that the EIDL program may require some collateral for loans over $25,000.