How to Finance a Small Business Property With Only 10% Down


By Bruce Hurta

Believe it or not, a small business owner can sometimes obtain financing from Members Choice Credit Union (MCCU) to buy a small business property with only 10% of the project cost as a down payment!  This kind of leverage is accomplished with a SBA 7(a) loan which is partially government guaranteed by the U.S. Small Business Administration.  MCCU is an SBA Preferred Lender, and that designation gives MCCU the authority to qualify a small business borrower in-house without relying upon a second round of credit approval from the SBA.

In this economic environment, where conventional bank financing may require 30% down to finance a small business property, how does MCCU use the SBA program to qualify borrowers with only 10% down?  There are three different ways to achieve this:

  1. If the loan applicant small business has a stable, consistent cash flow which is sufficient to make the payments on a 90% loan, they may qualify. MCCU will evaluate the business’ historical and projected cash flow, the owners’ and business’ credit history, the management experience and credentials of the owners, and the balance sheet equity of the business to assess the adequacy of the proposed collateral for the loan.

If the business or its owners have other assets, such as investment real estate or marketable securities, they may pledge additional collateral for the loan to help qualify for financing up to 90% of the project cost.

If the seller carries a second lien note, and agrees to stand by on payments until the SBA loan is repaid first, this may be another method to enhance the small business borrower’s minimum 10% cash down payment to qualify for financing to purchase the property.

New startup businesses and special purpose properties generally require more than a 10% cash injection from the borrower.  An SBA loan is not the cheapest form of borrowing for a small business; however, its pricing is reasonable, and the small business can achieve the lowest down payment and longest repayment terms for financing its small business real estate.

For more information, please contact:

Bruce Hurta is Business Lending Manager with Members Choice Credit Union. You can reach him at 281-754-1112 or by email


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