The Guidant Blog

Your guide to starting, growing and selling your small business

Down Payment for SBA Loan

December 17, 2009 by @guidant

SBA loans are difficult to obtain in the first place. Combine this with the fact that once you do secure your SBA loan you will need to provide at least 20% cash down and it is no wonder that many prospective small business owners don’t even consider SBA loans as a viable financing option.

What many entrepreneurs do not know, however, is that the Guidant 401(k) Small Business Investment Program can be used to provide the down payment for your SBA loan from your existing IRA or 401(k) accounts, tax and penalty free.

This program is different from a loan against your 401(k) plan or a private note against the assets in your retirement plan. The Guidant 401(k) enables you to directly invest your retirement funds into your own business – as an equity partner. Just as it can buy stock in publicly traded companies, your IRA or 401(k) can invest into your privately held business (when done correctly!).

What many people don’t realize is that the cash they need to inject as the initial down payment for their SBA loan may already be in their possession. In fact, many SBA lenders and SBA sponsored programs recommend that people consider the Guidant 401(k) to secure the required cash investment to proceed with an SBA loan. This can be a much better alternative to taking a distribution and paying the early withdrawal penalties and taxes. Unfortunately thousands of people, who don’t know they have a potentially better option, take the distribution and pay upwards of 40% to the government! It’s simply not necessary.

Guidant has worked with numerous SBA approved lenders and SBA sponsored programs, like SCORE, to provide entrepreneurs with an alternative to mortgaging properties and cashing out retirement plans at a severe penalty to meet the down payment requirement.

Do you have money in a traditional IRA or 401(k)? Are you hoping to secure an SBA loan, but are unsure about where your good faith cash is going to come from? Or, are you hoping to obtain a larger SBA loan, but only have enough liquid capital to meet part of the cash requirement?

Call us. You may already have the money you need – you just don’t know how to access it yet.

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  • 6 thoughts on “Down Payment for SBA Loan”

    1. Great info; however, please note that under the current guidelines, in addition to SBA 504, SBA 7a is requiring only 10% down payment. Fees that might push the DP to 15-20% continue to be waived.

    2. I recently came across your post and have been reading along. I thought I would leave my first comment. I don’t know what to say except that it caught my interest and you’ve provided informative points. I will visit this blog often.
      Thank you,

    3. The small businesses are getting ignored in these issues, especially when looking for small business loans or financing. The big corporations don’t seem to have an issue raising money by selling bonds, big bank loans. Small business loans aren’t getting approved that’s why so many are looking to business cash advances to leverage their credit card receipts. The banks that got the money aren’t approving small businesses for badly needed loans, that are why more and more merchants are turning to merchant business cash advance, or merchant cash advance loans to leverage their credit card receipts.

      Charles Baratta

    4. Small business should definitely be given more chances and leeway when it comes to financing, and their overall contribution to employment and the GDP should be taken into account within this loan process.

    5. Brandon Ho says:

      SBA Down Payment – Can It Be Borrowed?
      I have one house in Tifton,i bought it in 2014 for $30,000 paid cash,market price now about $55,000, and one in Atlanta,the one in Atlanta it now on the market for sale $285,000,my equity in that house $150,000 if sale price $300,000,I would like use these equity in these house as collateral to borrow the down payment to purchase the chicken farm.it that be OK ?

      1. Guidant Financial says:

        Hi Brandon. You’d potentially be able to borrow from home equity for your down payment. For more on the SBA requirements as they apply to this, you can see their site here. Lenders will also likely want to see collateral, so you’ll need to balance that requirement with the need for a down payment. A good first step in obtaining an SBA loan is pre-qualifying with Guidant. Pre-qualification is free and can be done online in minutes. As always, feel free to give us a call at 888-472-4455.

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