Low Down Payment Commercial Loans From the SBA

100% Financing Now Available

It used to be that if you were looking to use SBA financing to purchase a business or purchase owner-occupied commercial real estate - or if you were doing a new build from the ground up - that you could either get a low down payment commercial loan with just 10% down, or if you were moving from renting to owning and looking to finance a fairly generic or multi-purpose property, that some lenders would offer 100% financing.

The new SBA rules allow for many more types of businesses and properties to be financed and not just with a low down payment, but with nothing down.

They key is that the transaction has to be considered a "business expansion," meaning it has to fit one of the following criteria:

  1. you are buying a business just like one you currently own 
  2. you are doing a "rent replacement" transaction where your business is moving from renting to owning
  3. you are doing an "expansion" where you are opening a new location of your business
  4. you are doing an "expansion" where you are purchasing someone else's business just like your current business

In any case, the new rules require that the new location or expansion must be for a business just like one you currently own, with identical ownership, in the same geographic area - and it must have the same 6 digit NAICS code

In the past, there were lenders who would offer 100% loans for fairly generic properties and even some business expansions without real estate, but this new rule allows for nothing down for any type of SBA-eligible transaction - even including real estate assets like self storage, rv parks, assisted living and e-commerce businesses as long as you have a long enough history of capably owning and profitably operating the business you are looking to expand.

You can visit our 100% financing page to get more information on how to finance owner-occupied commercial property.

And you can visit our business purchase loan page to understand how to get this done for a transaction that does not include real estate.

If you intend to put 10% or more down, then read below for more information about low down payment commercial loans with minimal down payment.

10% Down Commercial Mortgage

It can be difficult for small businesses to secure attractive commercial property financing unless they have stumbled upon SBA's programs for commercial real estate - the SBA 504 (aka the CDC 504 program) and the SBA 7a.

These Small Business Administration programs are some of the only commercial loans available with a 10% down payment (or no down payment), but they really offer more than just high leverage, because both programs allow you to finance closing costs and fees which effectively make them at a minimum "90% loan to cost" financing, and the 7a allows business owners to finance working capital as well as any other legitimate business expense.

90% Loan to Cost financing can make a tremendous difference in your total out of pocket costs leaving you more capital to run your business.

By comparison, most conventional commercial lenders will require you to bring 20% to 30% equity in addition to enough cash to cover all closing costs and in many cases you will need to provide your own working capital.

Borrowing The Down Payment, Gifts, Etc.

The 7a program also allows the down payment to be "gifted" to you (typically by a friend family member) or it can be borrowed against another asset - for instance, a home equity line of credit (HELOC) or investment property. The key is that the you will need to show that you have the capacity to repay the HELOC from another source of income other than that of the business in need of property financing.  The income needs to be consistant and stable and income from a spouse is acceptable.

Some 504 program lenders actually allow your business to borrow the down payment as long as you can show that the additional debt is not going to hurt your business in any way. This feature could be very valuable to many businesses seeking building financing as interest rates rise, because the 504 is a long term fixed rate program.

Other possible down payment options are:

  • Tax free retirement account rollovers
  • Seller held funds on "full standby"
  • "Investors"

The SBA allows for a lot of flexibility with the source of a small business loan down payment, but they will want to make sure that a borrower has enough of their own cash at risk.


100% Financing For Professionals AND Established Businesses

In addition, there are certain situations where some professionals/businesses can finance a building/practice with no down payment. Currently, there are 100% programs for:

These programs are possible in these industries due to their low historical default rates.

If you belong to one of these groups of professionals/businesses and you are looking for 100% financing, then please contact us at 1-800-414-5285

90% to 100%+ Loan to Cost Investment Property Financing (Sort Of)

One almost completely overlooked feature of both programs is that to qualify as an "owner occupied" transaction, the borrowing business only needs to occupy 51% of the building.*

This allows you to rent out 49% of your building to other tenants to help cover your costs. This is a tremendously valuable feature as this means you can finance your building long term at up to 90% to 100% "loan to cost" AND have a tenant (or tenants) help you pay the mortgage.

You cannot use the income from tenants to help you qualify for the building under the 7a program, but you can count up to 75% of the income from tenants under the 504 if the leases with the tenants are at least 5 years, you are financing a multi-purpose building and your cash flow is almost strong enough to qualify on your own.

*60% for new construction with both the 7a and the 504.

More Information

Please click links below for more detailed information on both low down payment commercial loan programs:

7a Loan Program

504 Loan Program

Or contact us at 1-800-414-5285 if you have any questions.