Glossary
Equity injection
On this page4 sections
What it is
The equity injection is the buyer's own capital contributed to the acquisition — the part that is not borrowed from the lender.
The rule
On an SBA 7(a) change of ownership the injection is 10% of total project cost. On an Initial Acquisition — a new majority owner who was not previously an owner or employee, which is most first-time buyers — the SOP states in terms that it cannot be reduced or eliminated [1] . Two consequences follow, and both catch buyers:
- It is calculated on project cost, not purchase price. Additional financed costs raise the injection by a tenth of themselves.
- It is not negotiable with a lender. This is not a credit policy a strong borrower can argue past. Individual lenders may require more — that part is their own policy — but nobody can require less.
What can count toward it
A seller note can contribute, but only on strict terms: it must be on full standby, and it may fund no more than half of the required injection [1] . On a $108,000 injection, that caps the standby note contribution at $54,000 — the remaining $54,000 has to be actual cash.
This is where the widely repeated idea of buying a business with no money down runs into the rule. See buying a business with no money down for what is genuinely available instead.
What to do with it
Size it before you make an offer. The equity injection planner takes a price and additional costs and returns the project cost, the injection, the standby cap and the loan amount. The full guide covers the detail.
Frequently asked questions
Can a lender waive the equity injection?
Not on an Initial Acquisition. The SOP says in terms that the requirement cannot be reduced or eliminated for that transaction type, so this is not a credit policy a strong borrower can argue past. On a Business Expansion or an Owner Buyout a lender may reduce or eliminate it, on a liquidity and working-capital test.
Is it 10% of the purchase price?
No, and this is where buyers' cash estimates go wrong. It is 10% of total project cost, which is the purchase price plus the other costs being financed. A $1,000,000 price with $80,000 of additional financed costs is a $1,080,000 project, so the injection is $108,000 rather than $100,000.
Can a seller note cover it?
Only half of it, and only on strict terms. The note must be on full standby, meaning no payments of principal or interest for the term of the 7(a) loan. On a $108,000 injection that caps the note's contribution at $54,000, and the other $54,000 has to be unborrowed cash.
Sources cited on this page
Every mutable number on this page — program caps, tax rules, thresholds, filing deadlines — traces to one of these primary sources. Rules change; check the source before you act on the number.
- 1 U.S. Small Business Administration. SOP 50 10 8.1 — Appendix 15: 7(a) Changes of Ownership. https://www.sba.gov/document/sop-50-10-lender-development-company-loan-programs
Educational only — not legal, tax, lending, or investment advice. Confirm specific rules, rates, and forms with the relevant New York State agency, attorney, CPA, lender, or insurer before acting. See the editorial policy and methodology for how sourcing and review work.