Equity Injection
Equity injection is the buyer's own money contributed to a financed acquisition, expressed as a percentage of total project cost rather than of purchase price. SBA requires at least 10% on a complete change of ownership.
Why Equity Injection Matters in a Laundromat Sale
Injection is the first place a buyer's plan meets reality. It is calculated on total project cost — purchase price plus closing costs, working capital, and any funded capex — not on the price alone, so the dollar figure is always larger than a buyer's first estimate. A seller note can cover no more than half of the requirement and only on full standby for the life of the loan (Source: SBA SOP 50 10 8). Lenders commonly require more than the SBA minimum.
Example
Purchase price $300,000, closing costs $18,000, working capital $25,000: a $343,000 project. The 10% minimum is $34,300, of which at most $17,150 could come from a standby seller note. A lender may still ask for 15% plus reserves from a first-time buyer.
What to Check
- Build the total project cost first: price, closing costs, working capital, and any funded capex.
- Document the source of every injection dollar; lenders trace it.
- Assume the lender wants more than the SBA minimum, especially for a first-time operator.
Where This Comes Up
- SBA Equity Injection Rules for a Laundromat Purchase
- Laundromat Loan Down Payment Requirements: Cash You Actually Need
- How Much Down Payment Is Needed to Buy a Laundromat?
Related Terms
- Seller Note — A seller note is financing provided by the seller
- Standby Agreement — A standby agreement is a written undertaking by a creditor — usually a seller holding a note — to take no payments and enforce no remedies against the borrow...
- Proof of Funds — Proof of funds is documentary evidence that a buyer has the liquid capital to complete a purchase: bank or brokerage statements
- Cash-on-Cash Return — Cash-on-cash return is annual pre-tax cash flow after debt service divided by the total cash a buyer actually invested
See the full laundromat glossary for all 78 terms.
The Next Step
Sources
- U.S. Small Business Administration, 7(a) Loans and SOP 50 10 8 — https://www.sba.gov/loans/7a-loans/
This page is general information about laundromat transactions, not legal, tax, or investment advice, and not a guarantee of sale price, timing, or financing approval. Verify current rules with your own CPA, attorney, lender, and the relevant state or municipal agency before acting.