Cash Injection Requirement
The SBA requires eligible borrowers to possess reasonable personal liquidity; such as cash, marketable securities or cash value of life insurance to inject the minimum equity percentage into the financing package.
SBA 7(a) loan requests to purchase a business or franchise, buy out a partner, start up or expand a business or to obtain working capital require between 5% – 25% cash injection depending on the amount requested and the bank entertaining the request.
Due to a recent update to SBA guidelines on the purchase of a business, now just 10 percent equity must come from the buyer and/or a seller note. Out of that 10 percent, at least 5 percent must come in the form of cash from the buyer, while the remaining 5 percent equity can come in the form of a seller note.
SBA 504 loans to purchase commercial real estate require a minimum cash injection of between 5% – 10% for multi-purpose properties such as, office and industrial and up to 15% cash injection for special purpose or single-purpose properties such as, gas stations, car washes and residential care facilities for the elderly.
To be clear, borrowers are not eligible to receive SBA guaranteed financing without the ability to contribute the required cash injection into the financing package.
My SBA Loan Pro
The My SBA Loan Pro Podcast is hosted by Your SBA Loan Pro, Ryan Smith. In each episode Ryan provides valuable information and best practices regarding the SBA loan program.
Each episode is approximately one minute in length and addresses topics related specifically to SBA 7(a) and 504 loan programs to purchase real estate, acquire a business or franchise and obtain working capital.
You’re encouraged to listen and subscribe to ensure you’re notified each time a new episode is available. Ryan publishes a new episode weekly on Tuesday mornings, unless he’s kidnapped to a deserted island of course.