How much do I have to put down on an SBA acquisition loan?

10 percent of total project costs, not just the purchase price. Project costs include the price, fees, and the working capital you borrow to get operational, so the real check is bigger than 10 percent of the number on the LOI. At least half of the injection, 5 percent of project cost, must be your own non-borrowed cash.

Can a seller note count as my SBA down payment?

Only under two hard conditions: the note must be on full standby for the entire life of the SBA loan, no principal and no interest payments, and it can cover at most half of the required injection. On a 10 percent requirement that is 5 percent of project cost. Many sellers refuse a ten-year full standby, so do not build the deal on it before the seller agrees.

Can I use a HELOC for the SBA equity injection?

Only if you have enough outside income to make the payments on it without touching the business. Under SOP 50 10 8 borrowed funds count toward the injection solely when repayment does not rely on the company you are buying. A HELOC serviced by the target's cash flow does not count.

How does the lender verify the equity injection?

With documents, before closing. Expect to show bank statements proving the funds sat in your account for at least 30 days, plus wire transfers and settlement statements at close. A promissory note or a gift letter alone is not sufficient evidence, and surprise deposits shortly before closing draw scrutiny.

The SBA Down Payment: What Counts as Your Equity Injection

Short answer: An SBA change-of-ownership loan requires an equity injection of 10 percent of total project costs, and the details are where deals die. Project costs means everything, not just the purchase price. At least 5 percent must be your own non-borrowed cash. A seller note can cover the other half only if it sits on full standby for the life of the loan. A HELOC counts only if outside income services it. And the lender will verify every dollar with bank statements before the wire goes out. Buyers who learn these rules at the closing table lose deals they could have structured around months earlier.

10 percent of what, exactly

The base rule under SOP 50 10 8, effective June 1, 2025: a complete change of ownership requires a minimum equity injection of 10 percent of total project costs. Not 10 percent of the purchase price. Project costs include the price, the loan fees, closing costs, and the working capital you finance to get operational. On a $2 million purchase with $200,000 of fees and working capital in the loan, the injection is $220,000, not $200,000. Small difference on paper, real difference in a wire.

The seller-note half, and its two conditions

Half of the injection can come from the seller, and on tight deals it often should. But the conditions are strict, and both bite. The seller note counts toward the injection only if it is on full standby for the entire life of the SBA loan: no principal payments, no interest payments, nothing, typically for ten years. And it can represent no more than 50 percent of the required injection, so on a 10 percent requirement the note covers at most 5 percent of project cost. The remaining 5 percent is your cash, no exceptions.

The practical problem is the first condition. A ten-year full standby means the seller ties up that money interest-free for a decade and stands behind the loan while doing it. Some sellers accept it as the price of getting their deal closed. Many refuse. Raise it early in negotiation, not after your lender asks where the injection is coming from. How the note fits into the broader structure is capital stack work.

What does not count

Borrowed money is the trap. A HELOC or personal loan counts toward the injection only if you have sufficient outside income to service it, meaning income that does not come from the business you are buying. If the plan is that the company's cash flow covers your HELOC payment, that money is not equity in SBA's eyes, it is more debt. This tightened under SOP 50 10 8 and catches buyers who did the same move successfully a few years ago.

Verification is documentary and unforgiving. The lender must verify the equity is injected and used as intended: bank statements showing the funds seasoned in your account for at least 30 days, wire confirmations, settlement statements. A promissory note or a gift letter alone is not sufficient evidence. If a relative is gifting part of the injection, move the money early and paper it properly, because a large deposit that appears two weeks before closing invites questions you do not want during underwriting.

The injection is a program constraint, not a deal constraint

For an owner buying once, the injection is a savings question. For an owner buying a company a year, it is a capital plan. Each deal consumes 5 percent or more of project cost in real cash, and your liquidity after the injection is itself underwritten, because a guarantor with nothing left is a decline risk. Serial buyers budget injection capacity across the program the same way they budget SBA guaranty room, and they size each deal so the cash requirement does not cap the next one. Deals that cannot clear the injection get restructured, seller-financed more heavily, or built as a smaller stack, which is the territory of financing a small acquisition.

Structuring the injection, the standby note, and the verification file is part of the Deal Structure discipline. Your lender and the current SOP have the final word on your specific deal, and the rules have moved twice in two years, so verify before you wire.

BluGrowth structures the injection before the lender asks: what counts, what the seller carries, and how the cash requirement fits a multi-deal program. Deal Structure, on retainer. Buy-side only.

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