The short answer: With an SBA 7(a) loan you need a minimum 10% down, and up to half of that can be a seller note on standby. After adding closing costs, working capital, and a cash reserve, most buyers of a $350,000 business need $45,000, $60,000 of their own cash; on a $1,000,000 business, plan for $110,000, $150,000. Find your ceiling with the max purchase price calculator.
The four things you're actually paying for
People fixate on the purchase price, but you never pay the full price in cash, the bank does. What comes out of your pocket is four separate buckets:
- The down payment (equity injection). SBA requires a minimum 10% of the total project cost on a full change of ownership.
- Closing costs and fees. The SBA guarantee fee, legal, appraisal, and lender fees, typically 3%, 5% of the loan, much of which can be financed.
- Working capital. Cash to run the business through the first slow weeks. Often built into the loan.
- Your personal reserve. The cushion you keep outside the deal so a surprise doesn't sink you.
The down payment is the floor, not the total
The 10% is what everyone quotes, but reserves and closing costs are what actually determine whether you can afford a deal. Budget all four buckets before you fall in love with a listing.
The down payment: 10% (and how to shrink it)
Under current SBA rules (SOP 50 10 8), a complete change of ownership requires a minimum 10% equity injection. The powerful lever: up to half of that 10% can come from a seller note on full standby, a loan from the seller with no payments for the life of the SBA loan. That drops your cash portion of the down payment to as little as 5% of the price.
So on a $350,000 business, the down payment is $35,000, but with a standby seller note covering half, your cash share of it can be just $17,500. The catch: not every seller will agree to a standby note, and you still need the other buckets in cash.
Worked example: a $350,000 business
This is the median-sized small business, near $350,000 at about 2.7× SDE, on roughly $130,000 of cash flow (BizBuySell Insight Report). Here's the cash math:
| Cost bucket | All-cash down | With standby note |
|---|---|---|
| Equity injection (10%) | $35,000 | $17,500 |
| Standby seller note (counts as injection) | $17,500 | |
| Est. closing costs & fees | $12,000 | $12,000 |
| Working-capital cushion | $10,000 | $10,000 |
| Your cash out of pocket | ~$57,000 | ~$39,500 |
Note that closing costs and working capital can often be rolled into the loan, pushing the true cash number lower still. A realistic planning range for a $350k deal is $45,000, $60,000.
Worked example: a $1,000,000 business
Scale the same structure up and the numbers grow proportionally, the 10% floor doesn't change:
| Cost bucket | All-cash down | With standby note |
|---|---|---|
| Equity injection (10%) | $100,000 | $50,000 |
| Standby seller note (counts as injection) | $50,000 | |
| Est. closing costs & fees | $32,000 | $32,000 |
| Working-capital cushion | $25,000 | $25,000 |
| Your cash out of pocket | ~$157,000 | ~$107,000 |
A planning range of $110,000, $150,000 is realistic for a seven-figure deal. Pressure-test any target price against your available cash with the max purchase price calculator and model the payment with the SBA loan calculator.
Don't spend your last dollar to close. The buyer who keeps a reserve survives the first bad month; the one who doesn't, doesn't.
Why the reserve is non-negotiable
The most dangerous mistake is emptying your accounts into the down payment. The first 90 days of ownership always bring a surprise, a big customer pauses, a piece of equipment dies, receivables come in slow. Keep three to six months of expenses in reserve, separate from the deal. It's the difference between a rough patch and a crisis. More on the transition in the after you buy hub, and on avoiding this and other traps in first-time buyer mistakes.
"No money down" is mostly marketing
Because SBA requires a 10% injection, true zero-down deals are rare and usually need heavy seller financing outside the SBA framework. You can lower your cash with a standby note, but plan to bring real money to the table.
How much can you actually afford?
Enter your cash and the numbers back into a realistic ceiling on purchase price.
Keep going
Frequently asked questions
With an SBA loan, the minimum is 10% down, and up to half can be a standby seller note. After closing costs, working capital, and reserves, most buyers of a $350,000 business need $45,000, $60,000 of their own cash; a $1,000,000 business runs $110,000, $150,000.
Rarely. SBA requires a 10% equity injection, but up to half can be a standby seller note, lowering your cash to about 5% of the price. Full no-money-down usually needs heavy seller financing outside the SBA framework.
Typically the SBA guarantee fee, legal, valuation and appraisal, and lender fees, about 3%, 5% of the loan. Many can be rolled into the loan rather than paid in cash.
At least three to six months of expenses, separate from the deal. The first months always bring surprises, never drain every dollar into the down payment.
Sources
- Median sale price, multiples, and cash flow, BizBuySell Insight Report (2026).
- SBA 10% equity injection, standby-note rules, and fees, sba.gov 7(a) program; SOP 50 10 8.
