SBA Equity Injection Requirements
The SBA's 10 percent equity injection for a start-up is measured on total project cost, not on the loan, and a start-up borrowing $350,000 or less is not exempt. SOP 50 10 8.1 repeats the rule word for word under the heading "7(a) Small Equity Requirements". A business is a start-up "if it has been in operation (i.e., generating revenue from intended operations) for 1 year or less", and "All 7(a) loans made to a Start-Up Business require a 10% equity injection based on the project cost". On a $350,000 project that is $35,000. For SBA Express and Export Express loans the SOP leaves the question "to the business judgment of the Lender".
This is general information, not legal or lending advice. We are not a lender, a CDC or attorneys. Your lender, or SBA on a non-delegated loan, decides whether your equity is sufficient and may ask for more than the SOP minimum. Confirm the figure, sources and standby terms before you sign.
How much equity injection does the SBA require?
At least 10 percent of total project costs for a 7(a) loan to a start-up. In a 7(a) change of ownership the minimum depends on the type of transaction: for an Initial Acquisition it is 10 percent and cannot be reduced. Outside start-ups and changes of ownership we found no percentage in the SOP for a 7(a) loan.
The start-up rule is in SOP 50 10 8.1, Section B, Chapter 1. The clock runs from first revenue, not incorporation.
SBA considers an equity injection (Applicant contribution) of at least 10 percent of the total project costs (all costs required to become operational, regardless of the source of funds, except for lines of credit and 504 loans) to be necessary for a Start-Up Business to operate on a sound financial basis.
Loans "approved more than 90 days apart from each other are considered to be separate projects". For every Standard 7(a) loan, start-up or not, "the Lender or SBA must determine that there is sufficient invested equity". The 10 percent is SOP policy; 13 CFR 120.150 sets no percentage.
| Start-up use of funds | Amount |
|---|---|
| Build-out | $140,000 |
| Equipment | $110,000 |
| Opening inventory | $30,000 |
| Working capital | $50,000 |
| Fees and closing costs | $20,000 |
| Total project cost | $350,000 |
| Equity injection at 10 percent | $35,000 |
| Most the 7(a) loan can fund | $315,000 |
Ten percent of the $315,000 loan would be $31,500, which is $3,500 short. And $315,000 is a 7(a) Small loan.
Do SBA loans of $350,000 or less need a down payment?
For a start-up, yes. Section B, Chapter 2, on 7(a) Small loans of $350,000 or less, has its own paragraph headed "7(a) Small Equity Requirements", and the start-up sentences under it repeat Chapter 1 word for word. Chapter 3, on 7(a) MARC loans, confirms it:
Unlike Standard 7(a) and 7(a) Small loans, 7(a) MARC loans do not have a minimum required equity injection based on use of proceeds.
For SBA Express and Export Express loans, "whether to require an equity injection, is left to the business judgment of the Lender".
| 7(a) delivery method | Start-up equity injection under SOP 50 10 8.1 |
|---|---|
| Standard 7(a), loans greater than $350,000 | 10 percent of total project costs |
| 7(a) Small, term loans of $350,000 or less | 10 percent of total project costs |
| SBA Express and Export Express, $500,000 or less | Left to the lender's business judgment |
| 7(a) MARC | No minimum based on use of proceeds |
One caution: a business purchase follows Appendix 15, which covers "all 7(a) loans involving changes of ownership", not this table.
What counts as an equity injection for an SBA loan?
Cash that is not borrowed, including a gift, and six conditional sources, on the list headed "Source of Equity Injection" in Section B, Chapter 1, repeated for 7(a) Small. That list is for start-ups and other loans that are not business purchases, which have their own list, described under the table.
| Source | Condition in Section B, Chapter 1 |
|---|---|
| Cash that is not borrowed | On the balance sheet or "from other sources (e.g. gift)" |
| A personal loan | Only if repaid from "a source other than the cash flow of the business (the salary paid to the owner by the business does not qualify)" |
| A grant | Only with no "repayment or clawback provisions during the life of the 7(a) loan" |
| Assets other than cash | "An appraisal or other valuation by an independent third party is required" if valued above net book value |
| Prepaid expenses | Eligible ones the lender has "verified by obtaining paid invoices, canceled checks, or bank statements" |
| Investor equity | Only if no agreement repays or returns it "prior to release of the guaranty" |
| Debt on full standby | Next section |
| Not a source: education, advisory services and Agent fees | "not eligible prepaid expenses and are not considered equity"; leave a plan writer's fee, ours included, out |
A 401(k) rollover (ROBS) is recognized: under Section A, Chapter 2 the lender records "that the Applicant is using a ROBS plan for the equity contribution".
A business purchase uses Appendix 15's list instead: the personal loan must be "a personal loan to a guarantor", no entry covers assets other than cash, so ask your lender before counting one, and investor equity sits inside the half cap below. The cost of the required financial due diligence report counts: "Any funds expended by the Applicant on the report can count toward the equity injection."
Can a seller note or other borrowed money count as equity?
A seller note or other debt of the business counts only on full standby, and in a business purchase only for up to half of the injection. Money you borrow personally is a separate source: see the personal loan row above. The standby rule, in the Standard 7(a) and 7(a) Small lists:
only debt that is on full standby (no payments of principal or interest for the term of the 7(a) loan) may be considered as equity for SBA's purposes
The lender documents it on SBA Form 155 or its own equivalent. Interest may accrue, to be repaid after the 7(a) loan is paid in full. Item 1 of Form 155 offers four payment options and says "Check only one box":
| SBA Form 155 (9/98), item 1 options in order | Full standby? |
|---|---|
| "To accept no further payments on the Standby Loan until Lender's Loan is satisfied" | Matches the SOP's test |
| "To accept interest only payments at a rate of" | No, interest is paid during the loan |
| "To accept payments of principal and interest at the rate of" | No, principal and interest are paid |
| Principal and interest "per annum beginning on" a written date | Depends on the date: ask your lender |
In a change of ownership, Appendix 15 sets a 10 percent minimum for each type of transaction. For an Initial Acquisition, the default category, it is 10 percent of total project cost and "cannot be reduced or eliminated". An Owner Buyout is measured on the purchase price; for Business Expansions and Owner Buyouts the lender may reduce or eliminate the requirement on conditions; ESOP purchases of a controlling interest are exempt. See our SBA business acquisition loan requirements page.
The same Appendix caps three sources:
The following sources, whether individually or in the aggregate, may provide no more than half of the required Equity Injection.
They are standby debt, seller debt "subordinated to the Lender and on full standby", and a minority investor under 20 percent with no control.
Worked example. Total project cost on an Initial Acquisition is $1,200,000, so the injection is $120,000. Limited sources may supply no more than half, $60,000: $60,000 of unborrowed cash plus a $60,000 seller note on full standby under the first option equals $120,000. If the seller's agreement allows interest during the loan, the second option, the note is debt and the buyer needs another $60,000 of eligible equity.
How does the lender verify the equity injection, and do the funds have to be seasoned?
Before any money is disbursed, with three documents, and the SOP asks for statements covering at least 30 days. The 60 to 90 days of seasoning repeated online is not in SOP 50 10 8.1; if your lender asks for more, that is its own requirement. Section B, Chapter 6, Documentation of Equity Injection: with the exception of SBA Express and Export Express loans, "Lenders must verify the SBA-required equity injection prior to disbursing any loan proceeds".
Verifying a cash injection takes three documents: a copy of the check or wire with evidence it was processed into the borrower's account or escrow; "A copy of the most recent statement(s) (covering at least 30 days) from the account where the funds are being withdrawn (showing that funds were available)"; and a statement showing the deposit, or a settlement statement or HUD-1 showing the use of the cash. A promissory note, gift letter or financial statement "is not sufficient evidence of cash injection without corroborating evidence".
How is the SBA 504 down payment different from 7(a)?
Three ways: statute rather than SOP, 10, 15 or 20 percent on every 504 loan, and a two-year clock. 15 U.S.C. § 696(3)(C) sets all four minimums: 15 percent if the business "has been in operation for a period of 2 years or less"; 15 percent for "the construction of a limited or single purpose building or structure"; 20 percent where both apply; and 10 percent otherwise. 13 CFR 120.910(a) repeats them, widening the second to "acquisition, construction, conversion, or expansion". Appendix 3 of the SOP defines a New Business: "A business that has been in operation for 2 years or less at the time the loan is approved."
So the 7(a) injection uses the Start-Up Business test, one year from first revenue, and the 504 contribution uses the New Business test, two years at approval. On a $1,000,000 project with no change of ownership:
| Months of revenue | 7(a) | 504, ordinary property | 504, Limited or Special Purpose Property |
|---|---|---|---|
| 9 | Start-Up Business: 10 percent, $100,000 | New Business: 15 percent, $150,000 | 20 percent, $200,000 |
| 18 | Not a start-up: no fixed SOP minimum | New Business: 15 percent, $150,000 | 20 percent, $200,000 |
| 30 | No fixed SOP minimum | 10 percent, $100,000 | 15 percent, $150,000 |
The 504 contribution also "may be borrowed as long as it is subordinate to the Third Party Loan and the 504 debenture". Our free SBA equity calculator gives the 504 figure; see also SBA 504 loan requirements.
What does your business plan have to show about the equity injection?
A sources and uses table that reconciles to total project cost, the date revenue began, a document behind every dollar of equity and a pro forma balance sheet. On a Standard 7(a) loan the lender, or SBA on a non-delegated loan, must decide whether "the equity position, any required equity contribution, and the pro forma debt-to-worth are acceptable"; a 7(a) Small credit analysis must include "a detailed discussion of the required equity and its adequacy". In detail:
- Sources and uses: a start-up's injection is 10 percent of the total, not of the loan.
- Revenue date: when revenue from intended operations began decides whether the start-up rule applies.
- Documents: 30 days of statements, a valuation for a non-cash asset, paid invoices for prepaid expenses, the standby terms of any seller note.
- Balance sheet: pro forma at closing, so the debt-to-worth is on the page.
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How we verified this
Every quotation was checked character for character against raw source text. All sources were retrieved again on 10 October 2026, including the SOP file SBA currently posts.
- SBA SOP 50 10 8.1, effective 1 October 2026, for the 7(a) rules, the definitions, Appendix 15 and the 504 borrowing sentence. Word file at sba.gov.
- SBA Form 155 (9/98), for the four payment options. PDF at sba.gov.
- 15 U.S.C. § 696(3)(C), for the 504 tiers and the two-year test. Read at the Legal Information Institute.
- 13 CFR 120.910, for the 504 tiers, and 13 CFR 120.150, which contains no percentage. Read at govinfo.gov (120.910, 120.150).
Not verified and therefore left out: seasoning periods longer than 30 days; whether a start-up may meet its whole 10 percent with standby debt; and earlier SOP editions. No 5 percent equity injection for a 7(a) loan appears in SOP 50 10 8.1.
Frequently asked questions
What is the SBA equity injection requirement for a start-up?
Under SOP 50 10 8.1, a 7(a) loan to a Start-Up Business, meaning one generating revenue from intended operations for 1 year or less, requires an equity injection of at least 10 percent of total project costs, not of the loan amount.
Is the SBA down payment 10 percent of the loan or of the project?
Under SOP 50 10 8.1 the start-up injection is 10 percent of total project cost, not of the loan. On a $350,000 project that is $35,000; 10 percent of the $315,000 loan would be $31,500, which is $3,500 short.
Do SBA 7(a) loans of $350,000 or less require an equity injection?
For a start-up, yes. SOP 50 10 8.1 repeats the 10 percent start-up rule under its own 7(a) Small Equity Requirements heading. For SBA Express and Export Express loans, whether to require an injection is left to the lender.
Can a seller note count as the SBA equity injection?
Under SOP 50 10 8.1, only on full standby: no payments of principal or interest for the term of the 7(a) loan. In a change of ownership it must also be subordinated to the lender and can supply at most half of the injection.
How long do funds need to be in my account for an SBA loan?
SOP 50 10 8.1 asks for statements covering at least 30 days from the account the funds leave, proof the transfer was processed, and proof of deposit or use. The 60 to 90 days quoted online is not in the SOP.
This page summarizes SBA SOP 50 10 8.1, SBA Form 155, 15 U.S.C. § 696 and 13 CFR 120.150 and 120.910 as retrieved on 10 October 2026. It is general information, not legal, lending or tax advice; we are not a lender, a CDC or attorneys. Your lender or SBA decides whether an injection is required, how much and what counts.