Glossary
Project cost
On this page3 sections
What it is
Project cost is the total cost of the transaction being financed — the purchase price, plus the other costs rolled into the loan request. Depending on the deal that can include closing costs, working capital, equipment, inventory, real estate and, where applicable, refinanced debt.
The distinction from purchase price is not academic. It is the single most common reason a buyer's cash requirement comes out higher than they expected.
Why it matters
On an SBA 7(a) change of ownership, the required buyer equity injection is 10% of total project cost, and on an Initial Acquisition the SOP states it cannot be reduced or eliminated [1] .
So the arithmetic runs on project cost, not on the headline price:
- A $1,000,000 purchase price with $80,000 of additional financed costs is a $1,080,000 project.
- The injection is 10% of $1,080,000 — $108,000, not $100,000.
- Every extra cost added to the project raises your cash requirement by a tenth of it.
That last line is the practical point. Financing working capital inside the loan is often the right decision, but it is not free of cash consequences — it raises the project, and the project raises the injection.
What to do with it
Build the project cost before you agree a price, not after. The equity injection planner does the arithmetic, and the equity injection guide explains what can and cannot count toward the injection.
If real estate is part of the deal, note that it sits inside project cost too — which on a property-heavy transaction is a much larger cash number than buyers expect. See buying the real estate with the business.
Frequently asked questions
Why does project cost matter more than the purchase price?
Because the equity injection is calculated on it. Every additional cost you finance inside the deal raises the base the 10% applies to, so it raises your cash requirement by a tenth of itself. Financing working capital inside the loan is often right, but it is not free of cash consequences.
What goes into project cost?
The purchase price plus the other costs in the loan request. Depending on the deal that can include closing costs, working capital, equipment, inventory and real estate. Real estate bought alongside the business sits inside it too, which on a property-heavy transaction is a much larger cash number than buyers expect.
Is it the same for every transaction type?
No. Change-of-ownership injections are based on total project cost, but for an Owner Buyout the requirement is based on the purchase price of the business as reflected in the purchase and sale agreement. Establish which type your deal is before you model the 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.