06/24/2026
The 10% Down Payment for Business Acquisitions:
Lately, several clients have had questions about business acquisition financing and the required equity injection.
For most business acquisitions, the best financing option is often an SBA 7(a) loan. Typically, this requires a 10% cash injection from the buyer. Lenders want to see that buyers are financially invested in the success of the acquisition.
A few things we help buyers understand:
• The 10% equity injection generally needs to be liquid funds available at closing. In certain situations, however, it can come from other sources (ask us about your specific situation).
• The seller may also be able to finance part of the equity injection, but there are specific SBA requirements. Currently, seller debt used toward the equity injection must be placed on full standby for the life of the SBA loan, meaning the seller cannot receive principal or interest payments until the SBA loan is paid off.
• In addition to the 10% equity injection, lenders typically require 5-10% post-closing liquidity; funds you still have available outside of the acquisition. This is separate from the transaction itself. The goal is to ensure the borrower has a financial cushion if the business does not perform as expected and that the acquisition has not consumed their last dollar. These funds do not necessarily have to be immediately available as cash but should be able to be converted to cash if needed (investments, retirement accounts, available lines of credit, etc.).
• While 10% is often the minimum requirement, contributing more capital to the deal can improve your chances of approval. We generally recommend buyers have access to 15-25% of the total acquisition cost when evaluating opportunities to account for both equity injection and post-closing liquidity requirements.
• For small franchise deals or certain startups, which we can also finance, plan to have a minimum of 15% cash injection as well as the 5-10% post-closing amount discussed previously.
The equity injection is often one of the biggest hurdles for otherwise qualified buyers.
If you're considering buying a business, what has been your biggest challenge so far: finding the right business, securing financing, or coming up with the down payment?
Please reach out if you have questions about SBA financing, business acquisitions, or how much capital you may need for a transaction.
* We also finance new and used equipment acquisition or leasing and real estate investments, should you have a need in these areas.
