SBA Question - Down Payment & Seller Note

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June 17, 2025

by a searcher from University of California, Los Angeles in Los Angeles, CA, USA

I'm currently in a competitive situation for a business acquisition, and it appears there were numerous Letters of Intent submitted. During a recent conversation with the broker, the subject of the down payment came up. Based on the specific SBA lending partner they seem to be considering, the broker suggested a 20% down payment would likely be required. Interestingly, my own pre-approvals from three different lenders are for a 10% down payment. This is where I'm seeking some insights or advice from the community. The broker seemed to indicate that it's common practice for SBA lenders, once a file reaches the underwriting stage, to request a higher down payment percentage. Is this a typical scenario in your experience? Adding another layer, the broker also mentioned the seller's strong preference to avoid holding a seller note. Any thoughts or advice on navigating this potential discrepancy between my pre-approvals and the broker's expectations would be greatly appreciated. Specifically, understanding how frequently SBA underwriters do indeed increase the required down payment and how that might impact the seller's stance on a note would be incredibly helpful.
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Reply by a lender
from University of Southern California in Los Angeles, CA, USA
The business broker is definitely mistaken. As long as you are working with good SBA lenders they will be able to finance the deal with 10% down and only really bad SBA lenders will try readjusting the deal after term sheet. I am happy to introduce you to great SBA lenders that can get the deal done at 10% down or even 5% down and 5% seller note on full standby.
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Reply by a searcher
in Mesa, AZ, USA
Not necessary, as long as the DSCR is good 10% is fine.
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