The short answer: Under SOP 50 10 8, every complete change of ownership needs a minimum 10% equity injection of total project cost. At least half must be your own non-borrowed equity (cash, gift funds, or a ROBS/401(k) rollover). The other half can be a seller note on full standby. So on a $1,000,000 deal you need $100,000 of equity, but as little as $50,000 of your own cash.
The 10% rule, precisely
SOP 50 10 8 (effective June 1, 2025) made the injection a hard floor. The details that matter:
- The minimum is 10% of total project cost, price plus closing costs plus any working capital in the loan, not just the sticker price.
- At least 5 percentage points (half the 10%) must be your own equity. It cannot all be borrowed.
- Up to 5 percentage points can be a seller note on full standby for the life of the SBA loan.
- The floor applies to startups (businesses under one year old) too.
- ESOPs are exempt from the minimum injection.
Same-NAICS expansion exception
If you already own a business and buy another under the same 6-digit NAICS code with identical ownership, the SBA treats it as an expansion, not a change of ownership, and the 10% minimum injection does not apply.
What counts as equity injection
The SBA cares about where your money comes from. These are accepted sources of the "your own equity" portion:
| Source | Counts as your equity? | Notes |
|---|---|---|
| Cash / savings | Yes | Must be seasoned and traceable, usually 2+ months of statements |
| Gift funds | Yes | Needs a gift letter; no repayment obligation |
| ROBS / 401(k) rollover | Yes | Rolls retirement funds into the company as equity; own tax/compliance rules |
| Sale of assets (stocks, property) | Yes | Document the sale and deposit |
| Seller note on full standby | Partial | Counts up to 50% of the required injection, see below |
| HELOC / personal loan | Sometimes | Only if the payment is covered by income outside the business |
| Standard seller note (with payments) | No | Not on standby = does not count toward injection |
| Another loan repaid by the business | No | Borrowed money serviced by the target isn't equity |
ROBS and retirement funds
A Rollover for Business Startups (ROBS) moves money from a 401(k) or IRA into a new C-corp that then buys the business, as equity, with no early-withdrawal penalty. It counts as your own non-borrowed injection, which is why many buyers with a big retirement balance but little cash use it. It has real tax and ERISA compliance obligations, so use a specialist provider and your CPA.
Borrowed money (HELOC, personal loans)
Borrowed funds are the gray area. A HELOC or personal loan can count as injection only if you can show the payment is serviced by income from a source other than the business you are buying, a W-2 job, a spouse's income, or another business. If the target has to make the payment, it is not equity.
The seller note: your biggest lever
The rule that saves buyers the most cash: a seller note counts toward the injection if, and only if, all three are true:
- It is on full standby for the life of the SBA loan, no principal and no interest payments the whole time.
- It is no more than 50% of the required equity injection.
- It is documented on SBA Form 155 (or an equivalent standby agreement).
Meet all three and half your down payment is money you never take out of your pocket. Miss any one, for example, the seller wants interest paid currently, and the note stops counting as equity. Start with our seller note term sheet.
Worked examples
How the same 10% plays out three ways on a $1,000,000 business:
| Structure | Your cash | Seller note (standby) | SBA loan |
|---|---|---|---|
| All cash injection | $100,000 | $0 | $900,000 |
| Half cash, half standby note | $50,000 | $50,000 | $900,000 |
| Cash + ROBS, no note | $100,000* | $0 | $900,000 |
*ROBS counts as your equity; the $100,000 comes from a retirement rollover rather than a checking account.
The middle row is the sweet spot for most buyers: a seller who believes in the business carries $50,000 on standby, and your own cash out of pocket is just 5% of the price. Model your exact number with the SBA loan calculator and the max purchase price calculator.
The 10% is fixed. How much of it comes from your own pocket is a negotiation.
Costs beyond the injection
Budget for more than the down payment. Closing usually includes the SBA guaranty fee, lender packaging fees, the business valuation, legal, and lien/UCC costs. Many of these are financed into the 7(a), but they raise total project cost, and therefore the 10% injection. Leave yourself a cash cushion for the first months of operating too. Check the deal cash-flows at a healthy DSCR using the DSCR calculator.
See your real down payment
Enter a price and structure to see cash needed, loan payment, and DSCR.
Frequently asked questions
A minimum 10% equity injection of total project cost. At least half must be your own equity; up to half can be a seller note on full standby, so your own cash can be as low as 5% of the deal.
Yes. A ROBS rolls retirement funds into the new company as equity and counts as your own non-borrowed injection. It has its own tax and compliance rules, use a specialist and your CPA.
Sometimes, only if the payment is supported by income from a source other than the business being acquired. If the target services the debt, the SBA won't treat it as equity.
Partially. It counts toward the 10% injection only if it's on full standby for the life of the loan, is no more than 50% of the injection, and is documented on SBA Form 155. See seller notes on standby.
Sources
- SBA SOP 50 10 8 equity-injection requirements, sba.gov 7(a) program; Starfield & Smith and NAGGL analyses (2025 to 2026).
- Seller-note-on-standby and Form 155 rules, Windsor Advantage & Pioneer Capital Advisory (2025).
- ROBS structure, general provider guidance; confirm tax treatment with a CPA.
