SBA 7(a) financing remains one of the most widely used tools for acquiring a small business. The program can support complete or partial changes of ownership, and standard 7(a) loans can reach as high as $5 million. Buyers who entered the market when low-down-payment structures were more common, however, need to understand that the rules changed materially in 2025.

Under SBA Standard Operating Procedure 50 10 8, which took effect June 1, 2025, a complete change of ownership generally requires an equity injection equal to at least 10% of total project costs. That is not necessarily the same as 10% of the advertised purchase price. Total project costs can also include other costs required to complete the acquisition, such as working capital, equipment and eligible transaction expenses included in the lender’s sources-and-uses schedule.

Consider a simplified example. A buyer agrees to pay $1.8 million for a company, needs $150,000 of working capital and has $50,000 of other eligible project costs. The total project cost would be $2 million, making the minimum required equity injection $200,000. Looking only at the purchase price would understate the buyer’s required contribution.

The buyer does not always have to supply the entire 10% in cash. A seller note may count toward the required injection, but only within strict limits. The note must be on full standby for the life of the SBA loan, meaning the borrower cannot make principal or interest payments on it while the SBA loan remains outstanding. In addition, the seller note cannot exceed half of the required equity injection.

In practical terms, a seller note can generally cover no more than 5% of total project costs when the required injection is 10%. The buyer must contribute the remaining 5% from cash or another acceptable equity source. A structure in which the seller carries the entire down payment and begins receiving payments after a short standby period no longer satisfies the equity requirement.

That does not mean seller financing has disappeared from SBA transactions. A seller can still provide a larger note or accept a shorter standby period if the lender approves the overall capital structure. The difference is that the portion failing to meet the SBA’s equity rules is treated as subordinated debt rather than as part of the buyer’s required equity injection. The buyer must still satisfy the 10% requirement separately.

Acceptable equity can come from several sources. Unborrowed cash is the most straightforward. A personal loan may also qualify when the buyer can demonstrate that repayment will come from income independent of the acquired company. For example, a home-equity line may be acceptable when the borrower has outside income sufficient to service it, but not when repayment depends entirely on salary or distributions from the acquired business. Certain grants, verified prepaid expenses and properly valued noncash assets may also qualify.

Buyers should also preserve liquidity beyond the minimum injection. The fact that a lender may permit a transaction at the SBA minimum does not mean closing with almost no remaining cash is prudent. Acquisition costs can change during diligence, working-capital needs can rise and the first several months of ownership may include one-time expenses that were not obvious when the letter of intent was signed.

The lender will also analyze whether the acquired business can support the proposed debt. The SBA guarantee does not replace underwriting. Lenders still evaluate historical cash flow, projected debt-service coverage, buyer experience, collateral, working capital and the reliability of the seller’s financial information.

A buyer with the minimum down payment but weak liquidity or an aggressive forecast may therefore still have difficulty obtaining approval.

For that reason, financing should be evaluated before a buyer becomes committed to a specific structure. A term sheet that assumes a seller note will count as equity may need to be revised if the note is not on full standby. A purchase agreement that excludes sufficient working capital may create a larger funding gap later. Buyers, sellers, brokers, attorneys and lenders should align on the capital structure early in the process.

Advisory List provides a more detailed explanation of the current SBA 7(a) rules for business acquisitions, including seller-note treatment, partial ownership changes, expansion acquisitions and financial-verification requirements.

A buyer preparing for an SBA-financed acquisition should build a detailed sources-and-uses schedule before finalizing the offer. The schedule should identify the purchase price, required working capital, transaction expenses, equipment or real-estate costs, the SBA loan, any seller financing and the buyer’s equity contribution. It should also distinguish between funds needed to satisfy the SBA injection and funds that will remain available after closing.

This distinction becomes especially important when a buyer is using retirement funds, a home-equity line, outside investors or a personal loan. Each source has different documentation requirements, and some sources that appear economically similar may be treated differently for SBA purposes. The lender will need to trace the funds, confirm that they are available and determine whether any repayment obligation depends on the cash flow of the acquired company.

Buyers should also avoid waiting until the end of diligence to confirm that the seller will accept a full-standby note. A delay of as much as ten years in principal and interest payments is a significant concession. Some sellers will agree because the note helps preserve the transaction, while others will prefer a smaller note that begins amortizing sooner.

That negotiation can change the buyer’s cash requirement and should be addressed before the parties spend heavily on legal, accounting and diligence work.

The central takeaway is straightforward: for a complete acquisition, plan around a 10% equity injection based on total project cost, not merely the headline purchase price. A qualifying seller note may cover up to half of that requirement, but the buyer should generally expect to bring meaningful cash and retain enough liquidity to operate the business after closing.