How Much Down Payment Do You Need for a Commercial Property?

Here’s the first surprise for most commercial buyers.

The down payment is bigger than they expected. Usually a lot bigger.

Home buyers get used to small down payments and government programs built to keep them small. Commercial lending doesn’t work that way.

But “bigger” isn’t one number. It depends on two things: the loan you use and the kind of buyer you are.

The Short Answer

Most commercial buyers put down somewhere between 10% and 35%.

• SBA 504 loan, established business: 10%
• SBA 504 loan, startup or special-purpose building: 15%
• SBA 504 loan, startup and special-purpose building: 20%
• Conventional commercial loan: usually 20% to 35%

Conventional lenders commonly ask for 20% to 35% down, while the SBA 504 program can go as low as 10% for qualifying owner-occupied purchases. cdcnewengland

That’s the range. Now here’s how to figure out where you land.

Why Is It So Much More Than a House?

Because the lender is taking a different kind of risk.

A house loan rests on your paycheck. A commercial loan rests on a business or a building’s rent. Businesses fail. Tenants leave. Buildings sit empty.

The down payment is the lender’s cushion. If the deal goes bad and they have to sell the property, your cash is what absorbs the first loss.

More cushion, less risk. That’s the whole logic.

How Much Down Payment Does an SBA 504 Loan Need?

If you’re buying a building to run your own business in it, the SBA 504 is usually the lowest down payment you’ll find. But 10% isn’t automatic.

Most 504 projects need 10% down, but that rises to 15% if the business is a startup under two years old or the property is special-purpose, and to 20% when both apply, according to Michigan CDC, an SBA 504 lender.

What counts as special-purpose? The SBA uses the term for buildings whose design or layout limits them to the use they were built for, such as gas stations, bowling alleys, farms, and wineries. 

Math time (all figures illustrative):

Back to our HVAC contractor buying a $1.2M flex building.

• Established business (2+ years), standard building: 10% = $120,000
• Same building, but the business is 18 months old: 15% = $180,000
• A startup buying a $1.2M car wash instead: 20% = $240,000

Same price. A $120,000 swing based only on who’s buying and what they’re buying.

One more detail people miss. The 504 percentage applies to the total project cost, not just the purchase price. If the contractor needs $100,000 in renovations and rolls them into the project:

• Project cost: $1.2M + $100,000 = $1.3M
• 10% down: $130,000

That rule could change for special-purpose buildings. In January 2026, the House passed the bipartisan Main Street Parity Act, which would cut the down payment on special-purpose properties to 10%, the same as standard projects. Rep. Lateefah Simon’s office announced the vote. As of the latest bill tracking, it’s still waiting on the Senate. Until it becomes law, the 15% and 20% tiers stand. 

What If You’re Buying as an Investor?

Then the SBA 504 is off the table. It’s built for owner-occupied buildings, not rentals.

Investors use conventional loans. And with a rental building, the lender doesn’t just pick a percentage. It sizes the loan to the rent.

If the building’s income can’t comfortably cover the loan payment, the lender shrinks the loan. Whatever the loan doesn’t cover, you do.

Math time (illustrative):

• Purchase price: $1.2M
• Lender’s standard offer: 75% loan, 25% down ($300,000)
• But the rent only supports a $780,000 loan
• Your actual down payment: $1.2M minus $780,000 = $420,000 (35%)

The percentage on the term sheet is a ceiling, not a promise. The rent roll decides the real number.

Where Can the Down Payment Come From?

Lenders don’t just want to see the cash. They want to know where it came from. Common sources:

• Personal savings. The simplest. Expect to show statements.
• Business cash. Common for owner-users, as long as the business keeps enough to operate.
• Partners. Friends, family, or co-investors putting in equity alongside you.
• Seller financing. The seller carries part of the price as a note, which can shrink the cash you bring to closing.

One thing the down payment doesn’t cover: closing costs, inspections, and the reserves you’ll want after you get the keys. Budget for those separately.

Recap

• Commercial down payments usually run 10% to 35%.
• SBA 504: 10% standard, 15% for startups or special-purpose buildings, 20% for both.
• The 504 percentage applies to total project cost, renovations included.
• A bill to drop special-purpose properties to 10% passed the House and is waiting on the Senate.
• Investors use conventional loans, and the building’s rent can push the down payment higher.
• Closing costs and reserves come on top.

Final Word

The down payment isn’t a number you look up.

It’s a number you figure out, based on your loan, your business, and the building.

Do the math before you tour. The buyers who get burned aren’t the ones who can’t afford 10%. They’re the ones who planned for 10% and found out at the term sheet it was 35%.

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