Can You Use a Gift as a Down Payment on an SBA 7(a) Loan?

Fortunately for SBA loan borrowers, there’s nothing preventing you from using a gift as a down payment on an SBA 7(a) loan. In most cases, however, the gift must be a from a family member. Otherwise, the lender may be concerned that the gift is actually a loan in disguise— and, that it might have undisclosed terms that could actually hinder a borrower’s repayment of their SBA 7(a) loan.

How Much of a Down Payment do I Need?

Depending on your creditworthiness, the size of your SBA loan, and your lender’s individual preferences, you’ll probably need to put down anywhere between 10% and 30% of the entire loan amount. However, if you want to buy an existing business, the SBA’s new policy permits you to do so with as little as 10% down, 5% of which can come from a seller note. To get that much financing, though, you’ll need to have both a lender and a seller who are on board with your goals.

Other Methods to Acquire the Funds for an SBA 7(a) Loan Down Payment

While getting a gift from a family member is a fantastic way to fund the down payment for your SBA 7(a) loan, its far from the only way to get the money you need. Other options include:

  • Using tax-deferred retirement funds in a 401(k) or IRA through the Rollovers as Business Start-Ups (ROBS) program

  • Getting a cash-out refinance or home equity line of credit (HELOC) on your home, or even a cash-out refinance or line of credit on a commercial property that you own

  • Taking out a personal loan (though this can be much riskier due to higher interest rates)

It’s important to keep in mind that if a borrower does decide to use a loan to finance their SBA down payment, they need to be able to prove that they can pay it back with income not derived from the business they are getting the SBA loan for. For example, if a borrower were to take out a personal loan to fund their SBA loan downpayment, and they had a full time job (or their spouse had a full time job) separate from their business, this would be an acceptable source of income.


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