The 10% equity injection - and the thin-equity first quarter
Last updated
Quick Answer
SBA requires an equity injection of at least 10 percent of total project costs on a 7(a) change-of-ownership loan.1
What it is
The requirement is a floor rather than a target, and it is stated in SOP 50 10 Version 8 as a minimum of ten percent of total project costs — not of the purchase price, which is a different and usually smaller number. Reinstated as a condition on change-of-ownership transactions effective 1 June 2025, it is what closed the zero-down acquisition window that had briefly existed.1
Operational context
What good looks like
Why It Matters
It sets the balance sheet you start with. A buyer who has met the minimum and no more has put every available dollar into closing and has almost nothing behind them for a bad first quarter — which is the quarter in which the seller leaves, the team is testing you, and receivables slow down while customers work out who to pay.1
Common mistakes
- Reading the ten percent against the purchase price rather than against total project costs, which include fees, working capital and closing costs.Open workflow article
- Treating the minimum as the plan. Meeting the floor exactly leaves no cash for the surprise every acquirer finds in month two.Open workflow article
Term Family
Related concepts
Frequently Asked Questions
What is The 10% equity injection - and the thin-equity first quarter in venture capital?
The requirement is a floor rather than a target, and it is stated in SOP 50 10 Version 8 as a minimum of ten percent of total project costs — not of the purchase price, which is a different and usually smaller number.
Why is The 10% equity injection - and the thin-equity first quarter important for startups?
Understanding The 10% equity injection - and the thin-equity first quarter is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
Sources & References
- 1.A1-06 — SBA SOP 50 10 Version 8, eff. 2025-06-01 (.docx)SBA SOP 50 10 Version 8, eff. 2025-06-01 (.docx)Gov / statistical primary(SBA requires an equity injection of at least 10 percent of total project costs on a 7(a) change-of-ownership loan.)primary · A1 · operating-compliance · rule
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