Updated November 13, 2026
Quick answer
Under SBA SOP 50 10 8.1 (effective October 1, 2026), every 7(a) business purchase starts at 10% equity of total project cost. At least half must be unborrowed cash or other unlimited sources. A seller note counts toward the other half only on full standby, with no payments for the life of the loan. Only Business Expansions and Owner Buyouts can have the 10% reduced or waived. Axiant Partners, a business-loan broker in Boca Raton, can find lenders for each structure.
Minimum Equity by Type of Deal
SOP 50 10 8.1, Appendix 15, sorts every purchase into one of four types. Initial Acquisition is the default; the lender has to document why a deal fits any of the others. The type sets the equity, the cash flow test and whether the seller can stay. This is the rule table; for one structure worked through end to end, see buying a business with 5% down.
| Deal type | Who it fits | Minimum equity | Can lender waive it? | Coverage |
|---|---|---|---|---|
| Initial Acquisition | A new majority or largest owner, or an employee of under 24 months | 10% of total project cost | No | 1.25 to 1 |
| Business Expansion | An operating business, 2+ fiscal years under current owners, buying 100% of a business in its 4-digit NAICS group | 10% of total project cost | Yes, with enough liquidity and no negative net worth | 1.15 to 1 |
| Owner Buyout | Existing owners or 24-month employees buying out a partner | 10% of the purchase price | Yes, same test | 1.25 to 1 |
| ESOP or cooperative | An ESOP or co-op buying 51% or more | None for an ESOP buying control | Not applicable | 1.25 to 1 |
Total project cost means all costs to become operational, whatever the source of funds, except lines of credit and 504 loans. Real estate bought in the same deal follows the same equity rules; split into two loans, the equity is allocated pro rata, and a 504 for the building follows 504 equity rules instead.
What Counts as Equity, and How Much of Each
The SOP splits sources into two buckets. Unlimited sources can cover all of the requirement. Limited sources, alone or together, can cover no more than half of it.
| Bucket | Sources the SOP lists | Cap |
|---|---|---|
| Unlimited | Cash that isn't borrowed (including a gift); a personal loan to a guarantor repaid from outside the business; grants with no clawback; verified prepaid expenses | None |
| Limited | Debt on full standby, including a seller note; non-controlling minority investors under 20% with no control | Half of the required equity, combined |
| Not equity | Fees paid to an agent, education or advisory costs; seller debt with payments | Doesn't count |
On a deal's required equity, that works out like this:
| Total project cost | 10% minimum | At least this from unlimited sources | At most this on standby |
|---|---|---|---|
| $500,000 | $50,000 | $25,000 | $25,000 |
| $1,500,000 | $150,000 | $75,000 | $75,000 |
| $3,000,000 | $300,000 | $150,000 | $150,000 |
Money spent on the lender's business valuation or Quality of Earnings report counts toward the injection, because the SOP treats it as the buyer's out-of-pocket due diligence. Our guide to where the down payment can come from covers documenting gifts and retirement rollovers.
The Seller Note: Equity or Debt?
The same promissory note is treated two very different ways depending on its payment terms.
- Full standby. No principal or interest for the term of the 7(a) loan. It counts as equity, up to the half cap. It can accrue interest and be paid after the 7(a) loan is repaid. The lender uses SBA Form 155 or its own standby agreement with the note attached, the seller subordinates its liens, and it can't act against the borrower without the lender's consent. A standby creditor can't also take an equity stake.
- Payments from day one. It's debt, not equity. Its payments go into the cash flow test, and if it is interest-only, the lender has to underwrite it on an amortization of no more than 10 years.
- Refinancing it later. Seller debt from the purchase can be refinanced once it has been in place and current, not on standby, for 36 months, and the new payment is at least 10% lower. See what debt an SBA loan can refinance.
Earnouts to the seller are prohibited. Buyer rebates tied to performance are allowed, but the money has to pay down the 7(a) loan. A working capital true-up isn't a rebate and can stay in the business.
When the Price Is Higher Than the Valuation
A lender-ordered business valuation must support the Business Purchase Price, which excludes owner-occupied real estate. Debt that supports the purchase, including seller debt not on full standby, is capped at the valuation. If the buyer pays more, the difference must be made up by equity. Here the SOP lets limited sources go past the usual half cap, but only on full standby.
Example: the seller wants $2,000,000 and the valuation comes in at $1,800,000. The $200,000 gap can't be lent by the bank or carried as an amortizing seller note. The buyer brings it as cash, the seller carries it on full standby, or the price comes down. A Quality of Earnings report that lowers earnings can shrink the supportable loan the same way.
- The valuation must be ordered by and prepared for the lender. Above a $350,000 purchase price it must come from an accredited appraiser (ASA, CBA, ABV, CVA or BCA).
- At $3 million and up, Initial Acquisitions and Business Expansions also need a QoE.
Partial Buyouts and When the Seller Can Stay
In an Initial Acquisition or Business Expansion the seller must leave, apart from a consulting contract of up to 24 months in total. In a partial change of ownership the seller can remain. Then every new direct or indirect owner, however small, joins the loan as co-borrower. A selling owner who keeps under 20% gives a full guaranty for at least two years after final disbursement. Someone employed under 24 months can't buy 50% or more, or become the largest owner, through a buyout without falling back to Initial Acquisition standards. Buying out a partner has the details.
Talk to an SBA specialist: (561) 268-0465, or get matched with acquisition lenders.
Frequently Asked Questions
What is the SBA equity injection for buying a business in 2026?
10% of total project cost for an Initial Acquisition, Business Expansion or ESOP-related deal, and 10% of the purchase price for an Owner Buyout, under SOP 50 10 8.1. Lenders can require more.
Can a seller note count toward the SBA equity injection?
Yes, if it is on full standby with no principal or interest payments for the term of the 7(a) loan. It can then cover up to half of the required equity.
Can the seller note be paid after two years?
Not if it counts as equity. SOP 50 10 8.1 defines full standby as the life of the 7(a) loan. A note with payments can still be in the deal, but as debt in the cash flow test, not as equity.
Can the SBA equity injection be waived?
For a Business Expansion or Owner Buyout, the lender may reduce or eliminate it if the borrower has enough liquidity and working capital and no negative net worth at the last fiscal year-end. Never on an Initial Acquisition.
Does the 10% include closing costs and working capital?
Yes. It's based on total project cost, which includes those, except lines of credit and 504 loans. For an Owner Buyout it's based on the purchase price instead.
Can a seller earnout be part of an SBA deal?
No. Seller earnouts are prohibited. A rebate from the seller to the buyer based on performance is allowed, but it has to be applied to the 7(a) loan's principal.
Sources & Further Reading
- SBA SOP 50 10 8.1, Appendix 15: 7(a) Changes of Ownership (effective October 1, 2026) — Transaction types, equity injection by type, seller debt and standby rules, valuation, Quality of Earnings, debt service coverage and collateral for acquisitions.
- SBA 7(a) Loans — Program overview and the $5 million maximum loan amount.
- 13 CFR 120.150: What are SBA's lending criteria? — SBA's criteria for 7(a) lending, including management ability, equity and repayment.
Figures above describe ranges commonly seen across lenders and reflect published guidance as of the date on this page. Confirm current terms with the cited source or your lender before acting.