Do You Need a Down Payment for a Business Loan?
A down payment for a business loan is not always necessary, but it may be a good idea if you have the capital.
Many, or all, of the products featured on this page are from our advertising partners who compensate us when you take certain actions on our website or click to take an action on their website. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.
Updated · 2 min read
Written by
Senior Writer & Content Strategist 
Edited by
Managing Editor 
Co-written by
Lead Writer Concerned about tariffs?
Many small-business owners are under increased economic stress and uncertainty following the latest tariff announcements. NerdWallet is here to help you find answers for whatever you're looking for. Here are some resources to help you get started:
- Need emergency funding? Consider a business line of credit.
- Looking for fast access to working capital? Discover the best working capital loans.
- Want tips on how to mitigate the impact of tariffs? Read our guide.
Even if a down payment isn’t required, providing one can strengthen your business loan application. It may improve your chances of approval, help you qualify for a lower interest rate and reduce your monthly payments.
Requirements vary by lender and loan type, however. Before you apply, understand when a down payment is required and how much you may need to contribute.
How much do you need?
We'll start with a brief questionnaire to better understand the unique
needs of your business.
Once we uncover your personalized matches, our team will consult you
on the process moving forward.
Find the right loan for your business
Tell us how much you need and see your options in minutes.What is a down payment for a business loan?
A down payment, sometimes referred to as an equity injection, is a lump sum of money that you provide upfront to when taking out a business loan. A down payment reduces a lender’s risk because it shows that you have skin in the game, meaning you’re motivated to repay the loan.
How much is a down payment for a business loan?
Typical down payments for a business loan range from 10% to 20% of the total loan or project amount — but may reach up to 30%. The specific amount you’re required to provide will vary depending on your lender, loan type and qualifications.
Example: Say you’re buying equipment that costs $100,000 and your lender says you need to put 10% down. You’ll contribute $10,000 and borrow $90,000. Providing this down payment will lower your monthly payment and total interest costs, compared to borrowing the full $100,000.
Although you can put down more than the minimum required, doing so could strain your cash reserves.
Do all business loans require a down payment?
Not all small-business loans require a down payment, but many traditional and SBA loans do. Here’s what you can expect, based on loan type:
| Type of loan | Typical down payment |
|---|---|
| 10%. | |
| 10% to 20%. | |
| None. | |
| None. | |
| USDA Business & Industry loan | 10% to 25%. |
| 10% to 20%. | |
| None. | |
| 10% to 30%. | |
| 0% to 20%. |
Whether you’ll need a down payment largely depends on how much risk the lender is taking. Traditional bank loans, SBA 7(a) and 504 loans often require at least 10% down because they’re often used for large investments, such as equipment, real estate or business expansion.
Asset-based financing, like equipment- or commercial real estate loans, are also more likely to require a down payment, especially if the project or purchase cost is high.
Many online lenders and microlenders, on the other hand, don’t require a down payment. Instead, lenders may offset risk with higher interest rates or shorter repayment terms.
What determines your business loan down payment requirement?
Although some lenders set a predetermined percentage for their down payment requirement, this isn’t always the case. The amount you’re asked to put down can vary based on:
- Type of loan.
- Loan amount.
- Purpose of the loan (how the funds will be used).
- Financial profile of the borrower (this can include the business owner’s personal financial history as well as that of the business).
All of these factors are evaluated by the lender during the loan application process. The stronger your credentials, the more likely you are to get a lower interest rate and a minimal down payment requirement. If you’re a new business or have a rocky credit history, you may be asked to put down more money.
How to get a down payment for a business loan
Some business owners use their cash reserves or personal savings to fund their down payments. If this isn’t realistic for you and your financial situation — or you simply want to look at all of your options — you might consider:
- Retirement savings. Rollovers as Business Startups (ROBS) allow you to use your retirement savings to fund your startup business without paying taxes on the money. Some entrepreneurs use ROBS to cover their entire startup costs and avoid taking out a loan, but this type of financing can be used as a down payment as well. ROBS is considered a risky funding method, however, because if your business fails, you could lose your retirement savings.
- Equity financing. Equity financing involves exchanging equity, or ownership in your business, for lump sums of capital. You could use angel investors or crowdfunding to get money for your down payment. Equity financing can also be a way to avoid taking out a loan entirely.
- Friends and family. Family or close friends who have the means and are willing to invest in your company can help you come up with a down payment for a business loan. You should always put the terms of these types of investments clearly in writing to avoid any potential conflict in the future.
Can you get a business loan with no down payment?
It is possible to get a business loan without putting money down. If a down payment requirement is keeping you from getting approved, you might consider other ways to strengthen your application — or even alternative methods to finance your business.
Ways to strengthen your application
- Collateral. Adding collateral, like equipment or real estate, to support a business loan application shows a lender that you are motivated to repay your loan. It can also help a lender recover some of their losses in the event of a default. Pledging collateral can significantly improve your chances of getting approved.
- Cosigner. Adding a cosigner to your business loan can also be a way to boost your business loan application. Generally, a cosigner should be someone you trust, who knows your business and has strong personal credit and finances.
Alternative types of financing
- Invoice financing or factoring. Both invoice financing and invoice factoring allow you to use unpaid invoices to get cash upfront. With invoice financing, you use your invoices as collateral. With invoice factoring, you sell unpaid invoices to a factoring company, and they assume the responsibility of getting payments from your customers.
- Business line of credit. A business line of credit doesn’t require a down payment and you only pay interest on the money that you use. Although these credit lines sometimes require collateral, they’re a great option for flexible funding, as well as building your business’s financial history and credit score.
Article sources
NerdWallet writers are subject matter authorities who use primary,
trustworthy sources to inform their work, including peer-reviewed
studies, government websites, academic research and interviews with
industry experts. All content is fact-checked for accuracy, timeliness
and relevance. You can learn more about NerdWallet's high
standards for journalism by reading our
editorial guidelines.
