Key Insight
The 10% equity injection sounds simple — it's not. What counts as equity, how it's verified, and whether seller financing qualifies all depend on specific SBA rules that vary by lender.
The SBA Minimum
SBA 7(a) acquisition loans require the buyer to inject at least 10% of the total project cost as equity. Total project cost includes:
- The acquisition purchase price
- Working capital allocation
- Closing costs (legal, lender fees, appraisal)
On a $1M acquisition with $50K in closing costs and $80K working capital, total project cost is $1.13M — requiring $113K in equity injection.
What Counts as Equity Injection
Counts: Cash from personal savings, cash gifts from family, proceeds from liquidating personal investments, ROBS (retirement fund rollovers into a new C-corp that acquires the business)
May count: Seller financing on full standby (no payments for at least 24 months post-close) — counted by most SBA lenders as equity-equivalent
Does not count: Borrowed funds (personal loans, credit cards, home equity lines used as injection); equity "contributed" by assuming existing business debt
Lender-by-Lender Variation
SBA rules set a floor; lenders add their own requirements. Some lenders require 15-20% for certain industries or deal profiles. Some accept seller financing on standby; others don't. Shopping lenders matters for both rate and structure.
Buyer has $80K liquid and $210K in a 401(k). Target deal: $950K purchase price. Total project cost: ~$1.05M. Required injection: $105K. Strategy: use $80K cash + ROBS $25K = $105K injection. SBA 7(a) loan: $945K. The retirement funds bridge the injection gap without an early withdrawal penalty.
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