How to Buy a Business with No Money Down

You can't. Not anymore.

I kept this headline because it is what every buyer types into the search bar. But the honest version of no-money-down is simple: as little of your own cash as the rules now allow. That floor is 5% of the purchase price, and it has to come from you.

The structure that used to make true zero down work (the seller carries the full 10% on standby, the buyer brings nothing) is gone. The SBA closed it. So here is what actually closes today.

The real floor is 5% from you

The SBA requires a 10% equity injection on a change of ownership. Under the current SOP, at least half of that (5% of the purchase price) has to be the buyer's own cash. The other 5% can come from a seller note, but only if that note sits on full standby (no payments at all) for the life of the loan.

So the leanest legitimate deal is 5% buyer cash plus a 5% seller note on full standby. We see this structure constantly. It is the real answer to the no-money-down question.

The one exception worth knowing

There is one scenario where the 10% injection requirement works differently: a partial buyout where one or more of the current owners retain a minority stake in the business, even if that is as little as 1%. This has to be structured as a stock purchase, not an asset purchase, and any owners staying on with the business are required to provide a full personal guaranty as co-signers for a minimum of 24 months.

This structure comes up often when an existing employee is buying the business from their employer. The seller stays on with a small equity stake, the transition is smoother, the lender has an additional guarantor, and the buyer gets into the deal with less friction. It is one of the cleanest paths we see for internal succession situations.

Getting the seller to hold 5% (and the premium it can cost)

A note on full standby means the seller waits years and gets paid after the bank. Plenty of sellers will still do it, usually the ones motivated by retirement, health, or relocation. Some will only agree if you pay for it.

It is common to pay a premium on the price to get a seller to carry on standby. That is the trade: a higher purchase price in exchange for less cash at closing. Run the premium against the cash you save and decide whether it is worth it on your deal.

Why lenders still want to see 10% or more

Hitting the 5% minimum gets you in the door. It does not mean the bank is comfortable. Lenders are paying more attention to buyer liquidity (whether you can weather a slow stretch after closing), so you should still have 10% or more of the purchase price available.

That can be your own cash, capital from partners, or money committed from investors. The lender wants to see a cushion behind you, not just the minimum injection. Thin liquidity is what turns a deal that qualifies on paper into a decline.

The all-investor version

You can raise the equity from investors instead of out of your own pocket. If you do, the rest of the story has to be strong: relevant operating experience, a business with clean cash flow, and a credit profile that holds up. When the money is all someone else's, the lender leans harder on you and on the business to carry the risk.

What kills these deals

Assuming you can bring $0. That option is gone, and planning around it wastes everyone's time.

Treating the seller note as a given. Whether the seller will carry on full standby is a structure conversation for the LOI, not a post-LOI ask. Raise it early. If the answer is no, you want to know that before weeks of due diligence.

Underestimating post-close liquidity. The lender is now underwriting your cushion as much as your injection. Walking in with exactly 5% and nothing behind it is a hard sell.

Sending a lean-equity deal to the wrong lender. Some lenders want more buyer cash than the SBA minimum as a matter of internal policy. Submit there and you get a decline after a six-week wait.

The honest caveat

Low down is not low risk. You are signing for a large debt with a thin cushion in the deal itself. It works when the business is strong, you can actually run it, and you have liquidity behind you. It fails when buyers use a lean structure to stretch into a deal they cannot carry.

If you are working through this on your own deal, pre-qualify with us. It is free and takes two minutes.