Does SBA 504 and SBA 7a require a down payment?

Yes, SBA loans require a down payment of at least 10% up to 30% depending on the strength of cash flow and the value of the collateral.

Brad Nakase, Attorney

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How much is a down payment for an SBA loan, for example?

Colleen is the owner of a café that sells delicious coffee, tea, and pastries. As the owner of a small business, Colleen is very familiar with how much it costs to fund all the different aspects of her company. Not only does she need money for equipment, but she needs funds for furniture, inventory, and payroll to support her employees. Recently, Colleen has been thinking about getting higher-quality coffee shipped directly from the Philippines and Africa. She is sure that this kind of investment will result in more customers, who will be eager to try her amazing brews. However, in order to stock this new inventory, Colleen requires an influx of money. As a result, she is considering asking for a loan. She has heard good things about SBA loans but knows that many of them require a down payment. Colleen wonders how much this down payment might be. She requires a loan of about $100,000, and with her savings taken into consideration, she would like to avoid paying more than $20,000 as a down payment. She wonders whether this is feasible under an SBA loan.

What Is an SBA Loan, and Does It Require a Down Payment?

The Small Business Administration (SBA) offers loans to small businesses, which are very popular because of their long loan periods, favorable terms, large loan amounts, and affordability. Entrepreneurs may grow their businesses using various investments funded by SBA loans.

Like many other kinds of loans, SBA loans often require a down payment. Only two types of SBA loans do not have the down payment requirement: CAPLines and Disaster Loans. Every other SBA loan program demands a 10% to 50% down payment. For those small business owners considering applying for an SBA loan, it is a good idea to understand what the down payment might be.

This article will discuss what an SBA loan down payment is, as well as what a small business owner should know about each SBA loan’s down payment requirements.

What Is an SBA Loan Down Payment?

An SBA loan down payment is the money that a business owner provides upfront to an SBA lender. This money serves as a condition of the business loan approval. An SBA loan down payment is no different from any other, expect that lenders will typically require lower down payments on SBA loans as compared to similar, non-SBA loans.

There are several different types of SBA loan programs available for small business owners to consider. These loan programs include the following:

  • 504 loans
  • 7(a) loans
  • Microloans

Each one of these SBA loan programs serves other purposes and has other down payment requirements. These specific requirements are discussed in the following sections.

What Is an SBA 504 Loan?

An SBA 504 loan is designed to help entrepreneurs buy or renovate equipment and commercial real estate to develop their business. For this reason, 504 Loan down payments are structured on a small business owner’s equipment or real estate price.

Is a Down Payment Required for an SBA loan in the 7(a) Program?

SBA 504 loans require a down payment. However, at a minimum of 10%, these loans typically have one of the lowest down payment requirements.

Sometimes, it may even be possible to pay less than 10% down if a small business owner succeeds in convincing a local government to offer financing. Still, even with a 10% down payment, this is a significant advantage. Let’s consider a million-dollar project. If a loan requires a 10% down payment, then the owner controlling this project would need to provide $100,000 in upfront cash savings. Compared to traditional loans, this is a serious advantage. Traditional lenders will typically ask for 20% to 30% of the purchase price as down payment.

Still, it is important for small business owners to remember that, sometimes, 504 loan down payments may go over 10%. The specific percentage will depend on the strength of a small business owner’s loan application. If an entrepreneur’s financials and business plan are strong and well thought out, then it is likely he or she will receive a lower business loan down payment requirement.

What Is the SBA 7(a) Loan Program?

The SBA 7(a) loan program is the Small Business Administration’s most significant program. The business financing that this type of loan offers can be used for many kinds of business expenses. These uses include the following:

  • Inventory
  • Working capital
  • Business startup financing
  • Real estate purchases

Is a Down Payment Required for an SBA Loan in the 7(a) Program?

Compared to 504 loans, SBA 7(a) down payment requirements tend to be stricter. Still, they can range between 10% to 30%, making them reasonable and still advantageous to small business owners.

When it comes to an SBA 7(a) loan, the Small Business Administration offers a guarantee of between 10% to 30% of the loan amount. This guarantee allows SBA lenders to offer certain borrowers lower down payment requirements. That said, there are multiple kinds of 7(a) loans, each of which has different down payment requirements.

The following is a list of the different types of 7(a) loans, as well as their minimum down payment requirements:

  • Standard 7(a) and 7(a) Small Loans: 15% for loans of up to $150,000 and 25% for loans of greater than $150,000
  • SBA Express: 50% for loans of up to $500,000
  • Export Express: 10% for loans of up to $350,000 and 25% for loans of over $350,000
  • Export Working Capital and International Trade: 10% for loans of up to $500,000

What Are Microloans?

The microloan program offers entrepreneurs small loans of up to $50,000. Small business owners interested in taking out a microloan can use these funds for the following kinds of expenses:

  • Working capital
  • Furniture
  • Machinery
  • Inventory
  • Other expenses that the lender approves

Is a Down Payment Necessary for an SBA Loan in the Microloan Program?

In order to secure an SBA microloan, a small business owner will need to provide a down payment. Because down payment requirements range between 20% to 30%, and loans for working capital tend to be around $10,000, borrowers will typically need to put down $2,000 to $3,000 for a microloan.


In general, a small business owner should expect to pay a down payment on SBA loan, with the exception of CAPLine and Disaster loans. If an entrepreneur is not prepared to offer a down payment on an SBA loan, then he or she is probably not in the position to apply for an SBA loan yet. For this reason, if a small business owner would at some point like to apply for an SBA loan with a down payment, it is a good idea to start preparing finances now in anticipation.

One of the best ways to do this is to set aside a little extra cash each month to raise the money necessary for an SBA loan down payment. It might also be a good idea to review other budgeting tips as a way of setting aside savings. While it can be difficult for any small business owner to manage cash flow, saving money to afford a down payment for an SBA loan will serve a business well in the long-term.

It is important to remember that SBA loans are generally only available to business owners that have already failed to secure traditional funding. Because of this, a business owner should be sure to pursue other funding options prior to applying for a loan from the SBA.

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