Down Payment Requirements

For an SBA 504 loan, the borrower typically invests 10% of the eligible project costs as equity. If the business is considered a start-up business (i.e., less than two years of operating history), the down payment increases to 15%. If the asset to be financed is considered “special purpose” (i.e., hotel, bowling alley, C-store), the down payment increases to 15%. If the project is for a start-up business financing a “special purpose’ property, then the down payment increases to 20%. If the business is a start-up or the project finances a “special purpose” asset, the bank providing the senior loan must finance at least 50% of the project so the extra equity required is deducted from the SBA 504 share of the financing.

RLDC micro loan funds may be used to supplement the borrower’s required equity or to replenish operating capital that is depleted by a large capital investment. For projects not involving SBA 504, the required equity is negotiated among the bank, RLDC and the borrower.