Equity Injection: What It Is and Where to Get It
Equity injection is often synonymous with down payment, but it can also refer to investor capital given in exchange for partial business ownership.
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Key takeaways
- An equity injection is a lump sum of cash put into a business, either as a loan down payment or in exchange for ownership.
- For SBA and commercial loans, equity injections function as down payments that show lenders the borrower has skin in the game.
- Equity injections can come from personal savings, assets or investors.
What is an equity injection?
An equity injection is a lump sum of money invested into a business at any stage. It can be:
- A down payment made by a borrower in order to qualify for a loan.
- Capital provided by an investor in exchange for partial ownership in the business.
How does an equity injection work?
When used as a down payment, an equity injection requires a lump sum of cash from the borrower. The amount is usually calculated as a percentage of the total loan or project amount.
For example, a 10% equity injection on a $100,000 loan would be $10,000. The exact amount you’re required to provide, however, can vary based on the lender and loan type.
An equity injection demonstrates to a lender that the borrower has skin in the game and is motivated to repay their small-business loan.
When an equity injection comes from an investor, on the other hand, the investor provides funds in exchange for ownership in the business. For example, a business needs $500,000 to expand. An investor gives $500,000 in exchange for 10% ownership. In this case, the $500,000 is the equity injection.
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For SBA loans, an equity injection may be required as a down payment in certain instances.
SBA 7(a) loans
For SBA 7(a) loans, an equity injection of at least 10% of the total projects costs is required if:
- The business is a startup (generating revenue for one year or less).
- Loan funds are being used for a complete change of ownership.
For SBA Express loans, however, the decision is up to the lender. If the lender normally requires an equity injection for its non-SBA commercial loans, it should for its SBA Express loans as well .
SBA 504 loans
All SBA 504 loans require a minimum 10% equity injection from the borrower. In some cases, however, the requirement is higher:
- 15% for new businesses (in operation for two years or less).
- 15% if you have a limited or special purpose property (such as bowling alleys, farms, gas stations, hotels and theaters).
- 20% if you’re a new business AND have a limited or special purpose property .
How much is an equity injection?
When used as a down payment, your equity injection amount is ultimately determined by your lender and your use of funds. The typical down payment for the purchase of commercial real estate, for example, ranges between 10% and 30%. For SBA loans, on the other hand, down payments range from 10% to 20%, depending on the use case and loan program.
Keep in mind that in many cases, down payments are calculated on the total cost of the purchase or project, as opposed to the amount of the loan you’re requesting. This means that even if you are only requesting a $50,000 loan for a $500,000 project, your down payment may still be calculated as a percentage of the $500,000, not the $50,000.
If the equity injection is coming from an investor, the amount depends on how much funding you need and how much the investor is willing to give. Additionally, the amount of ownership you provide in return can vary.
For example, you may ask an investor for $100,000 in exchange for 5% ownership. The investor, however, may ask for 10% ownership. Ultimately, you’ll need to negotiate and find an agreement that works for both parties.
When do I need an equity injection?
Down payments are often required by bank and SBA lenders. Online lenders are less likely to ask for an equity injection. Even if your lender doesn’t require one, providing a down payment shows that you’re serious about your loan and may improve your approval chances, as well as help you access the most competitive rates and terms.
When bringing on investors, on the other hand, an equity injection can help you fund your business without having to take on debt. Otherwise known as equity financing, this is a common option for businesses (like tech startups) that anticipate scaling quickly. The tradeoff is that your investors will have partial ownership of your company in return.
Sources for an equity injection
Common sources for equity injections include:
- Personal savings. If you have money put away, that may be the first source of funding for an equity injection or down payment. You could also consider your retirement savings, also known as a Rollovers as Business Startups (ROBS) transaction; however, this would put your retirement savings at risk and should be discussed first with a financial advisor.
- Investors or business partners. If you have a trustworthy partner or an investor willing to put money into your business, this can be a viable source of funds for an equity injection. Investors may expect shares or ownership in return and are usually required by lenders to have good personal finances.
- Sale of business or personal assets. Selling real estate or other valuable property can be a good way to get a lump sum of cash.
- Business assets. Depending on the lender, you may be able to use business assets or equipment as equity without liquidating them, meaning you don’t have to sell them for cash. You need to own the assets outright and will likely need to have an appraisal done if you haven’t had one recently.
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- 1. U.S. Small Business Administration. SOP 50 10 Lender and Development Company Loan Programs. Accessed Feb 12, 2026.
