If your small business needs funding, SBA loans can be a great option. Like with general small business loan down payments, not all SBA loans require a down payment, but those that do may ask you to put down at least 10% of the loan amount. Loan programs that require down payments include 7(a), 504 and CAPlines.
Not all SBA loans require a down payment, but certain types of loans may require a down payment of 10% or more.
| Loan type | Minimum down payment required |
|---|---|
| SBA 7(a) | At least 10% |
| SBA CAPline | 10% to 30% |
| SBA 504 | At least 10% |
| SBA express loan | None |
| SBA microloan | None |
| SBA disaster loan | None |
Three SBA loan programs have down payment requirements. The basic rule is 10%, but this amount could be more depending on the borrower or loan purpose
The SBA 7(a) loan program — the SBA’s primary business loan program — is designed for businesses that might not qualify for other types of business loans. The loans, which can be short- or long-term, are serviced by third party lenders but backed by the federal government.
To qualify for 7(a) loans borrowers must run US-based and for-profit small businesses and be creditworthy and capable of repaying the loan. There are several types of loans within the 7(a) program, and your lender can help you decide which option makes the most sense for your needs.
SBA CAPline loans fall under the 7(a) loan program and provide lines of credit for businesses in need of operating capital, funds to cover seasonal shortfalls or other purposes. The minimum borrower contribution is 10% but could be as much as 30%, depending on the circumstances.
SBA 504 loans are offered through Community Development Companies (CDCs). CDCs are community-based partners that promote local economic development and are certified and regulated by the SBA.
CDCs facilitate the loan process, which is funded in three ways: typically 50% by a third-party lender, 40% by the CDC and 10% by the borrower. Some borrowers may be required to kick in more than 10%, depending on the business and project type.
Some SBA loans require a down payment because an investment by the borrower signals a more serious commitment to repay the loan. And because the borrower has a financial stake in the loan, they are considered less risky by the lender, meaning they may qualify for better interest rates and loan terms.
It’s important to note that not all SBA loans require a down payment, but if you can afford to, it’s a good idea. Not only can you qualify for better terms, but you increase your chances of loan approval by having a stake invested in the loan.
You’ll submit your down payment to the lender that services your loan. Typically, you’ll present a cashier’s check or certified check at the time of loan closing. You may also arrange for a wire transfer of the down payment funds.
There are several ways to fund your SBA loan down payment.
If you don’t have the money for an SBA loan that requires a down payment or don’t qualify for other types of business loans, check out SBA loans that don’t have down payment requirements.
The SBA microloan program is designed for small businesses and some non-profit childcare centers looking to borrow $50,000 or less. The funds are provided by the SBA and serviced by third-party, community-based nonprofit organizations.
Each lender sets its own credit score and other requirements, and you’ll usually need to provide some collateral and a personal guarantee to qualify.
SBA express loans fall under the 7(a) loan program but are capped at $500k and are typically much faster to get than other SBA loans. These loans can be easier to get because the SBA guarantees a smaller percentage of the loan, and lenders are given more leeway in how they process and service the loans. SBA express loans are a better choice for businesses seeking fast funding.
The SBA disaster loan program is designed for businesses (and others) affected by federally declared disasters. Businesses can borrow up to $2 million to pay for losses not covered by insurance or FEMA, including both physical damages and operating expenses.
If your business is not eligible for an SBA loan, consider other options.
When your small business needs funding, the SBA offers a suite of loans for nearly every business purpose. Some loan programs require a down payment of at least 10%. Depending on your business or loan purpose, you may have to put down as much as 30%. However, these loan programs typically offer better interest rates and loan terms than other loans. Plus, these down payments may be smaller than with other loan options.
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