How much is the down payment on commercial property?

How do lenders decide the down payment?

Commercial lenders size the loan first and let the equity fall out of the math. The loan is the lowest result across the tests the lender applies: loan-to-value on the lower of price or appraised value, loan-to-cost on projects with construction or renovation, debt service coverage on the property's net operating income, and debt yield on many larger loans. Whatever the loan does not cover, the buyer funds.

Required equity = total project cost minus the loan amount

Down payment by financing path

Worked example: equity at different LTV levels

In this hypothetical example, an investor buys a stabilized property for $5,000,000. Each row shows the loan and cash down payment at a hypothetical loan-to-value level, before closing costs and reserves.

What happens when coverage caps the loan before LTV?

Keep the same hypothetical $5,000,000 property and give it $350,000 of net operating income. At a hypothetical 7% rate with 25-year amortization and a 1.25x coverage minimum, the property supports a loan of about $3,301,000. A lender offering 70% LTV would reach $3,500,000 on value alone, but coverage cuts the loan to $3,301,000 and raises the down payment to $1,699,000.

At 65% LTV the value test produces $3,250,000, which sits under the coverage limit, so LTV controls. Once income becomes the constraint, a higher advertised LTV does not reduce the buyer's cash. The loan sizing calculator runs both tests at once.

How is equity measured on a construction project?

Construction equity is set by loan-to-cost. In this hypothetical example the total project cost, including land, hard costs, soft costs, and the interest reserve, is $20,000,000. At a hypothetical 60% LTC the loan is $12,000,000 and the sponsor funds $8,000,000. At 65% the loan is $13,000,000 and equity is $7,000,000. At 70% the loan is $14,000,000 and equity is $6,000,000.

Land already owned usually counts toward equity, though lenders differ on whether they credit it at cost or appraised value. Construction lenders generally expect the full equity in the project before the first loan draw, so timing matters as much as the amount.

What does SBA require for owner-user property?

SBA sets its minimums in SOP 50 10. In a typical 504 project, a third party lender provides at least 50% of the financing, a certified development company provides up to 40% through a debenture, and the borrower contributes at least 10%. The borrower contribution rises to at least 15% for a new business, defined as operating 2 years or less, or for a limited or special purpose property, and to at least 20% when both apply. Administrative costs are excluded, and the base contribution may be borrowed if it is subordinate to the third party loan and the debenture.

For 7(a), SBA requires an equity injection of at least 10% of total project costs for a start-up business, defined as operating 1 year or less. Outside those cases the lender decides whether the equity is adequate based on the type of business, management experience, and competition. These figures appear in the SOP 50 10 8 version and in SOP 50 10 8.1, which takes effect October 1, 2026. Occupancy and eligibility rules also apply, as covered in SBA 504 and 7(a) financing.

What cash do you need beyond the down payment?

• Lender origination and processing fees
• Appraisal, environmental, property condition, and survey reports
• Title insurance, escrow, legal, and recording costs
• Tax, insurance, and replacement reserves collected at closing
• Interest reserve and working capital on transitional or construction deals
• Earnest money that goes hard before financing is final

Which one fits your deal

These hypothetical buyers show which rule usually sets the equity.

• An investor buying a stabilized apartment or retail property: a conventional loan, with equity set by the lower of the LTV and coverage results.
• An established business buying the building it will occupy: an SBA 504 standard project often needs the least cash, and it should be compared with a conventional owner-occupied loan.
• A business in its first year buying property: 7(a) with its start-up equity injection or 504 with the new business contribution, depending on the uses of proceeds.
• A developer building ground-up: loan-to-cost sets the equity, and owned land may cover part of it.
• A value-add buyer with low in-place income: a bridge loan sized on cost can require less day-1 cash than a permanent loan capped by coverage.
• A sponsor whose equity falls short of the gap: mezzanine debt or preferred equity layered behind the senior loan, if the senior lender allows it.

Getting a real equity number

The only reliable down payment figure comes from sizing the actual property against lenders that fit it. Capital Partners arranges acquisition, construction, bridge, and SBA financing from $1M to $100M. Submit the deal with the purchase price, income, and project budget, and a principal will review the equity each path requires.

Common questions