Money & Financing
What is a down payment?
The portion of the purchase price you bring to closing in cash or equivalents.
Practical Explanation
A down payment (sometimes called an 'equity injection') is the money you put in up front. The rest of the price is covered by loans or seller financing. The size of the down payment depends on the financing structure — anywhere from 5% on a layered SBA deal to 30%+ on a conventional bank loan.
Real-World Example
On a $400,000 deal with 10% SBA structure, the down payment is $40,000.
Typical cash required
5–30% of purchase price, depending on structure.
Experience required
Not a function of the down payment itself.
Advantages
- ✓Demonstrates commitment to lenders and sellers
- ✓Reduces total debt and monthly payments
- ✓Often required by SBA rules
Risks
- !Tying up most of your savings in one asset
- !Leaving no cushion for early-stage surprises
Frequently Asked Questions
Can a partner provide the down payment?
Yes — many buyers split the equity injection with an investing partner who takes a minority stake.
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