How Much Down Payment Do You Need for a Commercial Building?

The 504 program has the clearest answer, because the regulation and SBA's operating procedure state it. These figures come from 13 CFR 120.910 and SOP 50 10 8.1, effective October 1, 2026, as read in November 2026. They can change, so confirm them with a Certified Development Company (CDC).

• At least 10 percent of project cost in the standard case.
• At least 15 percent if the business has operated for two years or less, or if the project is a limited or single purpose building.
• At least 20 percent if both of those apply.

Percentages apply to project cost, excluding administrative costs. On a hypothetical, illustrative $2,000,000 project, those tiers come to $200,000, $300,000 and $400,000.

The SOP gives examples of limited or special purpose properties, including hospitals, surgery centers, urgent care centers and other health or medical facilities, as well as hotels, cold storage above a set refrigerated share, gas stations and wineries. The list is not exhaustive, and SBA may treat other properties the same way. Clinical buyers should raise this with the CDC at the start, since it may change the required cash.

The SOP's standard 7(a) section states one numeric minimum relevant here: a start-up, meaning a business in operation for one year or less, needs an equity injection of at least 10 percent of total project costs. Changes of ownership have their own requirements.

For an established business, the SOP says the lender or SBA must determine that there is sufficient invested equity, based on factors such as the equity position, debt-to-worth, type of business, management experience and competition. That section sets no single percentage for an established business, so your lender's answer will be specific to your deal. Ask for the lender's requirement in writing.

There is no program rule to quote for a conventional loan, and no single figure fits every deal. What federal banking standards do provide is an outer boundary. Under 12 CFR Part 365 (read November 2026), banks should set their own loan-to-value limits, and those limits should not exceed a supervisory limit, listed at 85 percent for improved property.

On that basis, a bank at the limit would lend up to 85 percent of value, which leaves at least 15 percent of value for equity. That is a ceiling for internal policies and not an offer, and the rule allows limited exceptions. The OCC's handbook adds that the limits are not a safe harbor and that higher-risk property should carry more equity. Expect a lender to consider your cash flow, your industry and the building's marketability.

Part 365 says that for a loan to purchase an existing property, value means the lesser of the actual acquisition cost or the estimate of value. An appraisal may not match your contract price, and if it comes in low, the gap may come out of your cash.

Hypothetical, for illustration: you agree to pay $2,000,000, and a lender will advance 85 percent of value. If the appraisal supports the price, the loan is $1,700,000 and you bring $300,000. If the appraisal comes in at $1,900,000, the loan falls to $1,615,000 and you need $385,000, unless the price changes. That is $85,000 more in cash from a $100,000 appraisal shortfall.

SBA programs have their own response. For a 504, the SOP says that if an appraisal comes in below 90 percent of the estimated value, the debenture must be reduced or additional collateral or investment secured, unless SBA approves based on strong, consistent cash flow. Have your attorney consider this when setting your contract's financing terms.

Lenders care about the source of your equity as well as its amount. Under 13 CFR 120.910, 13 CFR 120.912 and the SOP, a 504 contribution may be cash, land that is part of the project or funds that were borrowed. If a borrowed contribution is secured by project assets, the loan must rank behind the 504 loan's liens and may not be repaid faster than the 504 loan without SBA's written approval. If it is secured by other assets, the SOP requires the borrower to show repayment from the business's cash flow or other sources. Equity in land or buildings already owned may count if they are part of the project.

For 7(a), the SOP lists sources such as unborrowed cash, debt on full standby for the term of the loan, and qualifying grants, and it says lenders must verify required equity before disbursing proceeds. Plan to document where the money came from.

Ask about the source of funds before you move money around. Moving cash between owners or accounts close to closing can create documentation questions for your lender.

Being able to fund the down payment does not settle the question, because running short afterward is its own risk. A 504 loan cannot pay for working capital or inventory, according to SBA's page, so this cash must come from elsewhere under that program. Your budget should cover at least these items:

• ✓Down payment or required contribution?
• ✓Closing costs, title, legal and lender fees, including any fees not financed?
• ✓Appraisal, environmental, survey and building condition reports, some of which you pay even if the deal fails?
• ✓Earnest money, and when it becomes nonrefundable?
• ✓Build-out and equipment not covered by the loan?
• ✓Moving costs and any overlap with your current lease?
• ✓Reserves for early repairs and replacements found in the condition report?
• ✓Enough working capital for your business's normal slow periods, by your CFO's estimate?

1. Get the required contribution in writing from each lender you are considering.
2. Add closing, report and move-in costs for a total cash figure.
3. Subtract that from your available cash, then have your CFO compare what is left with your operating needs.
4. If the remainder is too thin, change the price range, the loan type, the timing or the building.

Tenant Advisory Group is a broker, not a lender, so your lender and CPA have the final word on these numbers. We help buyers set a price range and negotiate purchase terms, such as deposit timing and contingencies, that work with the cash plan.