What counts, and what people try to count
Cash from the buyer counts. Gifted funds may count if seasoned and documented to the lender’s rule. Full-term standby seller paper can count up to half. A current-pay seller note does not. An earn-out does not. A handshake “we will leave money in” does not. SBA’s published 7(a) terms are the source for the $5 million maximum that sits next to this 10% (Source: SBA).
Why the percent is of project cost
Lenders add uses: price, required working capital, closing costs, sometimes a refinance. Ten percent of a $4 million price is not ten percent of a $4.6 million project. Write the uses in the letter or you will rediscover the injection at credit.
Census CBP 2023’s 284,452 establishments are why many injections are life-changing checks for individual buyers, not fund draws (Source: Census CBP). BizBuySell’s 2.75x SDE median does not reduce the percent (Source: BizBuySell).
| Source | Counts toward 10%? |
|---|---|
| Buyer cash | Yes |
| Full-term standby seller note | At most half |
| Current-pay seller note | No |
| Earn-out | No |
Who confirms the mix?
The SBA lender. Jason Taken is a business broker. Educational information only. Counsel and the lender own the sources-and-uses.
How to write the injection in the letter without lying
Show sources and uses in one exhibit: price, working capital left in, fees, refinance if any, buyer cash, standby note amount, and the 7(a) request. If the standby is meant to count, write “full term, no principal, no interest, subordinated to SBA.” If you cannot write those words, do not call it injection.
Searchers sometimes try to count a rollover as the whole 10%. Rollover can be part of a structure. It is not automatically SOP equity. Ask the lender before the teaser promises a 5% check. Individuals sometimes try to count a home-equity line that is already spoken for. Seasoning and tracing are credit facts.
Sellers who need cash at close should not agree to a standby they cannot live with. A note that pays nothing for ten years is a different retirement than a five-year amortizing note. Those are different nouns. See seller note and standby.
Do not use BizBuySell’s 2.75x SDE median to argue the injection should be smaller (Source: BizBuySell). Multiples do not amend SOP 50 10 8. The glossary only defines the contribution.
Isolation
The glossary keeps injection off “seller financing.” The FAQ holds the question. When the 10% mix is the deal, book a confidential intro call.
Gifted funds, home equity, and partners who have not signed
Lenders will ask where the cash sat and for how long. A transfer from a relative last Tuesday is a gift-letter conversation, not a closed issue. A HELOC that is already maxed is not dry powder. Trace it before the credit memo. A 10% that depends on a partner who has not signed a commitment is a hope. Name the money or change the price.
A CIM or letter should show sources and uses, bank evidence of the cash, and the exact words on any standby paper. Gift letters and HELOC seasoning belong in that first packet, along with the project-cost uses that make ten percent larger than a price-only napkin. SBA 7(a) for manufacturing acquisitions explains the box. The lender traces the cash. After the contribution noun is straight, a confidential intro call is the conversion path.
What the injection is not
It is not a current-pay seller note. It is not an earn-out. It is not a handshake “we will leave money in.” It is not automatically a rollover. Searchers sometimes try to count a rollover as the whole 10%. Rollover can be part of a structure. It is not automatically SOP equity. Ask the lender before the teaser promises a 5% check.
How it shows up: sources and uses in one exhibit — price, working capital left in, fees, refinance if any, buyer cash, standby note amount, and the 7(a) request. Ten percent of a $4 million price is not ten percent of a $4.6 million project. BizBuySell’s 2.75x SDE median does not reduce the percent (Source: BizBuySell). Multiples do not amend SOP 50 10 8. Census CBP 2023’s 284,452 establishments are why many injections are life-changing checks for individual buyers, not fund draws (Source: Census CBP).