How Much Is The Down Payment For An SBA Loan? (2024)

SBA loans can be a great option for small business owners who need financing. With flexible repayment terms and competitive interest rates, these loans can give businesses the boost they need.

The U.S. Small Business Administration partially backs SBA loans, and participating banks and lenders issue them. A typical down payment for an SBA loan is 10% of the total loan amount, but some lenders require a larger down payment.

SBA loan requirements can vary between loan types, and some SBA loans don’t require any down payment.

When Is an SBA Loan Down Payment Required?

These SBA loans typically require a down payment:

• SBA 7(a) loan for startups and business acquisitions
• SBA CAPLine loans and lines of credit
• SBA 504/CDC loan for major expenses

But you typically don’t need to make a down payment for these SBA loans:

• SBA Express loans offering quick disbursem*nt
• SBA Microloan with lower loan amounts
• SBA Disaster loans

Your SBA loan down payment will depend on your loan and lender. Before starting an application, research the qualification requirements so you can be prepared with what you’ll need.

SBA Loan Down Payment by Loan Type

SBA loans are offered in many different sizes, giving you options to decide which is best for your business.

Here are the down payment requirements for common SBA loans:

SBA 7(a) Loan

Down payment requirement: 10%

The SBA requires borrowers to make a 10% down payment on 7(a) loans for startup businesses and business acquisitions. For 7(a) loans used for other purposes, the individual lender may require equity if they do so for their other similar (non-SBA) loans.

The SBA 7(a) loan program offers loans up to $5 million with terms ranging from five to 25 years. You can use these loans for inventory, machinery, working capital, real estate and other purposes.

The interest rate on an SBA 7(a) is calculated by adding the prime rate to an additional increment, and that increment is determined by the rate type (fixed or variable) and loan amount. As of July 10, 2023, the prime rate is 8.25%.

SBA CAPLines and Express loans are also 7(a) loans, and can require a 10% down payment but that depends on the applicant and the lender. CAPLines are lines of credit up to $5 million with repayment terms as long as 10 years. They can be used to finance various expenses, including overhead and administrative costs.

Express loans max out at $500,000 and can be used to buy real estate or equipment, cover operating costs or refinance existing debt. Express loan approval is typically quicker than for other SBA loans.

SBA 504/CDC Loans

Down payment requirement: 10%

The CDC/504 loan offers financing up to $5.5 million. These loans are designed to help business owners finance major purchases, such as commercial equipment and real estate. You can repay a CDC/504 loan over a term of 10, 20 or 25 years, and the available loan term will depend on whether the loan is used for equipment, real estate or another expense.

The 504 loans have a 50/40/10 loan structure. This means that business owners need to provide a 10% down payment, another 50% of the loan amount comes from a conventional lender and the remaining 40% comes from the SBA.

Why Do SBA Loans Often Require Down Payments?

Some SBA loans require down payments upfront as a way to reduce risk to the lender. In the eyes of a lender, making a down payment means you have a greater interest in paying off the loan, and as a result, may be less likely to default.

A down payment—for any loan—can reduce the amount you need to borrow, resulting in lower monthly payments. A smaller loan also can cut your interest costs over the life of the loan.

How To Make a Down Payment for an SBA Loan

When you make a down payment for an SBA loan, you’re putting money directly into your business. You’ll provide the funds upfront to the lender in the final steps of the loan closing process.

Some business owners may be able to afford to cover the down payment out of pocket—perhaps by cutting costs in their daily operations or selling equipment. In other cases, it can be from revenue that has gone into savings.

Although you can use borrowed money for a down payment for an SBA loan, there are regulations that dictate the types of funds that can be used for a down payment. Before you try to borrow the money, consider all of your options, know how you’ll pay off your debts and work with a lender to ensure your down payment will be eligible.

SBA Loans With No Down Payment

Some SBA loan programs don’t require business owners to provide a down payment upfront, including:

SBA Express Loans

SBA Express loans come with an accelerated turnaround time of up to 36 hours, according to the SBA. The maximum amount for an Express loan is $500,000.

Express loans are available as either loans or lines of credit, and terms can go from 10 years for business acquisitions and working capital to 25 years for real estate.

SBA Microloans

SBA Microloans are processed and distributed by an intermediary lender. They offer up to $50,000 to small business owners with terms up to six years and interest rates typically between 8% and 13%. Your rates and terms may be different depending on the individual lender.

You can’t use a microloan toward refinancing debt or buying real estate. However, you can use it to rebuild, repair or improve your business. The process of getting your microloan processed and approved may take one to two months.

SBA Disaster Loans

If your business has been affected by a disaster, you may qualify for an SBA Disaster loan, which can be used to help repair and rebuild homes and businesses after any insurance proceeds have been paid. These loans offer up to $2 million with repayment terms of up to 30 years. Loans used to fix physical damages to businesses have maximum interest rates of 8%.