Down payment requirements range from 0% on fully secured equipment financing to 10% on SBA 7(a) loans to 20–30% on conventional commercial real estate loans — the required equity injection depends entirely on the loan product, collateral type, and lender risk appetite.
A down payment — called an equity injection in SBA terminology — serves one purpose: to give the lender a collateral cushion and demonstrate borrower commitment. The required amount scales with the lender's risk position. Products backed by hard collateral (equipment, real property) that the lender can repossess and liquidate require smaller or no down payments. Unsecured or partially secured products require more equity from the borrower to compensate for thinner collateral coverage.
The SBA SOP 50 10 establishes the equity injection requirement for SBA 7(a) loans: for most transactions, the borrower must inject at least 10% of the total project cost from verified, non-borrowed funds. This applies to both acquisitions and expansions. Startups and businesses with limited operating history often face a higher requirement — 15–20% — because the lender has less cash flow history to rely on. The equity injection can come from personal savings, gift funds with proper documentation, or equity already in the business.
The SBA 504 loan program uses a three-tranche structure: a conventional first lien from a bank covering 50% of project cost, a CDC (Certified Development Company) debenture covering 40%, and the borrower's equity injection covering the remaining 10%. For special-purpose properties (gas stations, car washes, single-tenant facilities with limited resale market), the borrower injection rises to 15%. For startups using a 504 loan, the injection is 15–20%.
Conventional commercial real estate loans (non-SBA) typically require 20–30% down depending on property type and lender. Office and retail carry higher requirements than industrial or multifamily commercial. Community banks may go to 20% for strong borrowers with existing relationships; non-bank commercial lenders often require 25–30% because they lack the SBA guarantee backstop.
Equipment loans and leases are collateralized by the equipment itself. For new, widely marketable equipment (forklifts, delivery trucks, CNC machinery), many lenders offer 100% financing with no down payment — the collateral is the down payment substitute. Used equipment or specialized machinery (restaurant hoods, medical imaging) with limited secondary market value may require 10–20% down to bring the loan-to-value ratio within acceptable limits.
SBA 7(a) general purpose loan: $50,000 down (10%). SBA 504 commercial real estate: $50,000 down (10%) — bank covers $250,000, CDC covers $200,000. Conventional commercial real estate: $100,000–$150,000 down (20–30%). Equipment loan (new, marketable): $0 down (100% financing). Equipment loan (specialized): $50,000–$100,000 down (10–20%).