Calculate equity from the complete sources-and-uses schedule, not from the purchase price alone. Financing eligibility and proceeds should be confirmed before treating any loan as available.
Hypothetical sources and uses:
| Use of funds | Amount |
|---|---|
| Purchase price | $12.0m |
| Transaction and financing costs | $0.4m |
| Initial renovation | $1.2m |
| Opening working capital and liquidity | $0.4m |
| Total uses | $14.0m |
| Assumed funded debt proceeds | ($7.8m) |
| Initial equity requirement | $6.2m |
This example excludes subsequent overruns and any additional lender restrictions. A loan described as 65% of a $12 million purchase price does not fund 65% of every project cost.
For eligible businesses, SBA’s published program comparison identifies 7(a) uses including business acquisition, real estate and working capital. The 504 program focuses on qualifying fixed assets; SBA states that 504 proceeds cannot fund working capital or inventory. (sba.gov)
Our recommended next step is to ask an experienced lender or Certified Development Company for a written eligibility and proceeds assessment covering the ownership structure, management arrangement, use of proceeds, required equity and guarantees.
Do not describe an SBA-backed hotel purchase as passive-investor financing or promise a particular down payment without checking the actual program and borrower requirements.