Some, but not all, SBA loan A down payment or investment of funds from the borrower is required at the beginning of the loan term. Usually calculated as a percentage of the total loan amount. The down payment demonstrates to SBA and the lender that you are willing to invest your funds in your business and that you intend to repay the loan according to the terms of the agreement.
Down payment requirements for SBA loans
$500,000 or $5 million, depending on the specific loan program. |
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*Down payment requirements and other loan terms may vary by lender.
SBA 7(a) Loan down payment
SBA 7(a) loans It can be used for working capital, refinancing debt, starting a business, purchasing another business, real estate or equipment. Some subcategories of SBA 7(a) loans may have borrower investment or down payment requirements.
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SBA Standard 7(a): This type of loan may require at least a 10% down payment if the loan is used to acquire a business. In other situations, down payment requirements may be left to the lender. Standard SBA 7(a) loan offerings are up to $5 million.
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SBA Express Loans: Determining if a down payment is required SBA Express Loan entrusted to the lender. However, if a lender requires a down payment on non-SBA commercial loans, it must also require a down payment on SBA loans. His SBA 7(a) loans of this type usually take less time to approve the loan, but the maximum loan amount he is limited to $350,000.
There are a few specialized 7(a) loan programs that typically have no down payment requirement, described below.
SBA CDC/504 loan down payment
SBA CDC/504 Loans Usually at least 10% down payment is required from the borrower. SBA partners with Qualified Development Firms to provide these loans specifically for the purchase, renovation or construction of commercial properties or the purchase of heavy equipment. Loans can reach up to $5.5 million.
This loan combines two types of lenders and a down payment to fully finance the loan.
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Up to 50% of loans come from traditional banks, credit unions, or other financial institutions.
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An additional 40% will come from the CDC or an accredited developer.
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The final 10% of the loan is usually covered by the owner’s down payment.
To qualify for an SBA 504 loan, a company must operate as a for-profit business in the United States or its territories, have tangible net worth of less than $15 million, and average after-tax net income of less than $5 million. I have. For the past two years.
SBA loan with no down payment
There are several loan programs available through the SBA, including some specialized 7(a) loans, that may bypass the down payment requirement. This is usually because the amount offered is relatively small or the loan program is designed for a very specific purpose.
SBA microloan
For companies in need of small funding, SBA microloan may be a good choice. SBA microloans are offered up to $50,000 and are available to for-profit businesses and some non-profit childcare centers.
SBA microloans can be used to rebuild, rehabilitate, or expand small businesses, and the funds can be used for working capital, inventory, supplies, furniture, equipment, machinery, and more. However, loan proceeds cannot be used to purchase property or pay off existing debt.
In general, some type of collateral is required to qualify for an SBA microloan, but each lender has its own lending and credit requirements. SBA microloans can be applied for at certain non-profit community-based organizations designated by SBA as intermediary lenders for the program.
SBA CAPLine program
of SBA CAPLine programA subcategory of 7(a) loans, this loan provides small businesses with a facility to meet their periodic or short-term working capital needs. These SBA lines of credit can reach up to $5 million.
To qualify for the SBA CAPLine, your business must meet standard SBA Loan 7(a) requirements. There may be some additional requirements depending on the specific her CAPLines product you are applying for.
SBA export loan
Another type of 7(a) loan, the SBA Export Loan, is designed to help SMEs expand their exports, participate in international trade and enter new foreign markets.
To qualify for an SBA export loan, your business must be involved in exporting goods or services to foreign countries or modernize your operations to compete with foreign companies.
SBA Disaster Loan
Ann SBA Disaster Loan Businesses can use it to recover from declared disasters and loss of key employees. There are three types of SBA disaster loans, all of which require no down payment.
When do I need a down payment for an SBA loan?
Down payment requirements vary by loan program and how the funds are used. For example, the SBA has set a minimum down payment of 10% for standard 7(a) loans used for corporate acquisitions. However, this is not always the case. In the Express Loan Program, SBA lets the lender decide if the borrower is required to make a down payment. But only if that requirement is consistent with the lender’s handling of non-SBA loans.
In general, SBA prefers borrowers to invest their own money when starting or acquiring a business, or when purchasing real estate, equipment or other assets. On the other hand, credit facilities used for working capital and disaster loans intended for business recovery require less down payment.
Why is a down payment required for an SBA loan?
Both SBA and its affiliated financiers know that when small business owners invest their money and time in their business ventures, they are more likely to pay back their loans in full.
Partial guarantee arrangements also result in significant losses for both SBA and the intermediary lender if the borrower fails to repay. SBA and its intermediaries want to know that borrowers have something to lose before they take this risk.
How do I raise the down payment for an SBA loan?
Can I get an SBA loan without a down payment?
Is it difficult to get approval for an SBA loan?
A version of this article was originally published on Fundera, a subsidiary of NerdWallet.