First, it is important to understand that most loans pertaining to business purchases will involve the Small Business Administration (SBA). Although lenders have some control over cash injection requirements, you will find that most lenders follow a similar pattern. In general, the requirement will depend on the type of purchase you are making i.e. business only, real estate only, or business with real estate combination, as well as the loan program for which you are applying. For real estate purchases, the equity injection requirement can be as low as 10%. When purchasing a business with real estate, again the requirement can be as low as 10% but generally will be a blended rate which will be determined depending on the price ratio (business vs. real estate). For business only loans, the amount of equity injection will vary depending on the strengths of the buyer, the business, and the transaction as a whole. The amount can be as low as 10% (not as common) but is generally between 20% – 25%. Transactions where intangible assets i.e. goodwill exceeds $500,000 the equity injection will be at least 25%
What is the required down payment “Equity Injection” for the purchase of a business with or without real estate?
Leave A Comment
You must be logged in to post a comment.