How Much Down Payment Do I Need for a Commercial Business Loan?

by Priti Ramjee ; Updated September 26, 2017
The small business loan low down payment allows you to save your money for working capital.

Purchasing equipment, vehicles and keeping enough money for working capital for your business may not be easy to cover financially with your own personal capital. A commercial business loan can be helpful in financing your business' needs. To show a lender that you are willing to assume some of the risk, a down payment is generally required to qualify. The amount of down payment varies depending on your personal financial strength and the amount of funds you need.

Zero Down for Working Capital

Commercial business loans are available for equipment or property financing but not always for working capital. You can get working capital for your business with no down payment by selling your invoices. An invoice buyer, known as a factor, purchases your invoices at a discount and he gives you a down payment of about 80 percent of the total amount of the invoice. He pays the balance of the price to you once he has collected the funds for the invoice.

Ten Percent Down Payment with SBA Loans

Businesses with a net worth of less than $7.5 million and net income less than $2.5 million qualify for the Small Business Administration, SBA, loan. The benefit of this program to business owners is that the loan is guaranteed up to 90 percent and the down payment can be as low as 10 percent. Funds must be used for business purposes: real estate, machinery, equipment, working capital, inventory or other business needs. SBA loans are offered through banks and other approved institutions.

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Fifteen Percent Down Payment with Private Commercial Lenders

Private lending groups or investment pools may offer capital for business loans with a smaller down payment of 10 percent to 15 percent of the amount of funds required to provide you with the balance of 85 percent to 90 percent depending on your business and personal financial strength. The interest rate is generally higher on private loans than with bank financing by a couple of percentage points.

Twenty-five Percent Down with a Conventional Commercial Loan

If you do not qualify for an SBA loan and are looking to purchase commercial property with a purchase price between $250,000 to $5 million, you may qualify for a conventional business loan through bank financing or private lenders. You will need a down payment of 25 to 30 percent of the purchase price to qualify. This applies to properties that are commercial, industrial and retail.


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