Halloween is the one time of year when a good scare is part of the fun. A scary financing myth is a different story. It can keep a business owner renting a building they could own, passing on growth they could fund, or accepting fast financing whose true cost is far higher than it first appears.
Most small business loan myths start with a half-truth. A rule that applies to one loan gets treated as a rule for every loan, and one lender’s “No” gets heard as everyone’s “No.” Below, we take five questions business owners ask about financing, check each one against the actual SBA loan requirements, and point to the AmPac program built for that situation.
Do I need 20% or more down to buy a building?
Usually not. Conventional loans typically require you to put 20% or more down, but with the support of the SBA, that number drops sharply. For most owner-occupied commercial real estate projects, the SBA 504 loan requires the borrower to contribute as little as 10% of the project cost. A bank provides a first mortgage for 50% of the purchase price or project cost, and a Certified Development Company like AmPac provides a second mortgage for up to 40%. The SBA portion carries a fixed rate with a choice of 10-, 20-, or 25-year terms.
The 20% figure does exist in the program, but only in a narrow case. Under SBA’s borrower contribution rules, the SBA 504 down payment rises to 15% for a business that has operated two years or less, or for a limited- or single-purpose building. It typically reaches 20% when both conditions apply. For an established business buying a general-purpose building, 10% is the standard.
In California, you can rebuild your cash after closing. Borrowers still bring their required down payment to closing. AmPac’s down payment assistance programs can then replenish up to half of it, up to $100,000, on commercial real estate financed through an AmPac 504 or 7(a) Community Advantage loan. One program serves first-time commercial property buyers, another serves businesses at least 51% owned by Black, Latino, or women entrepreneurs, and the Vet Advantage Program serves businesses at least 51% owned and controlled by U.S. veterans. All three require the business and the property to be in California, with the business occupying at least 51% of the space, and veteran buyers can also receive a rebate of up to $2,000 toward the cost of the environmental report.
Owning isn’t the right move for every business, and leasing makes sense for many. When buying does fit your plans, the cash you need at the closing table may be much less than you feared.
Am I too small for an SBA loan?
No. SBA offers an entire program for smaller needs, even for pre-revenue businesses. SBA Microloans go up to $50,000, and SBA puts the average microloan at about $13,000 nationwide. The money flows through nonprofit, community-based intermediary lenders, including Community Development Financial Institutions (CDFIs) like AmPac, that pair lending with management and technical assistance.
Microloans can fund working capital, inventory, supplies, furniture, fixtures, machinery, and equipment. They can’t be used to buy real estate or pay off existing debt. Each lender sets its own credit standards, though most ask for some collateral and a personal guarantee from the owner.
AmPac offers SBA Microloans at a fixed rate with no prepayment penalty, and now makes them available to businesses in California, Arizona, and Nevada. For needs a little larger, AmPac’s community lending programs range from $5,000 to $350,000, so a small request is the starting point of the conversation rather than the end of it.
The bank said no. Am I out of options?
Not necessarily. A bank’s decline often reflects that bank’s own rules more than the health of your business. As we explained in our look at Community Development Financial Institutions, banks answer to capital requirements and regulators, and small loans to young businesses with thin collateral are hard to fit inside those limits.
The SBA 7(a) Community Advantage program was built for businesses that might not qualify for traditional financing. These loans are made by mission-based lenders, and SBA set their maximum at $350,000.
AmPac’s 7(a) Community Advantage loans can fund working capital, equipment, inventory, business acquisitions, partner buyouts, owner-occupied real estate, and debt refinancing, with an equity injection as low as 10%. As a U.S. Treasury-certified CDFI, AmPac still has to be repaid, but it has room to look at the story behind the numbers. A rough quarter, a short credit history, or a request too small for a bank to pursue doesn’t end the conversation here.
Is fast cash my only option?
Fast cash is easy to find and expensive to keep. A merchant cash advance (MCA) is not technically a loan. As our 2024 look at merchant cash advances explains, the provider buys a share of your future sales at a discount, then collects through daily or weekly withdrawals or a cut of each card transaction.
MCAs usually don’t quote an interest rate. Instead, the provider sets a fixed payback amount, so a $100,000 advance might mean repaying $150,000, often in 18 months or less. Because repayment starts right away and comes out of the account constantly, the true annual cost can run far higher than a 50% markup suggests.
California was the first state to require cost disclosures for this kind of financing. Under SB 1235 and the regulations the Department of Financial Protection and Innovation put into effect on December 9, 2022, providers of commercial financing of $500,000 or less, including MCAs, must disclose the amount you’ll receive, the annual percentage rate (APR), the payment amount, the term, and prepayment terms. A 2023 follow-up law, SB 33, made the APR disclosure permanent.
If you’re a California business and an offer doesn’t show an APR, ask why. Some providers, such as banks, are exempt from the rules, so the form won’t appear on every offer. In Arizona or Nevada, California’s rules don’t apply, but you can still ask any provider for the same numbers before you sign.
Timing matters, too. Under SBA lending rules effective October 1, 2026, an active merchant cash advance can’t be refinanced with an SBA loan. The one path requires converting the advance into a term loan, paying that loan for at least 24 months, and taking on no new advances in the meantime. If your business needs capital, talk with an AmPac loan officer first, so you can weigh an advance against options like a Microloan or a 7(a) Community Advantage loan before you commit.
Do SBA loans take forever?
SBA financing has a reputation for paperwork and waiting. Some of that comes with any commercial real estate loan, because appraisals, environmental reports, and escrow take time no matter who the lender is. The SBA’s piece of the process, though, moves differently when your lender has delegated authority.
AmPac holds Premier Certified Lenders Program (PCLP) status for SBA 504 loans. Under SBA’s PCLP rules, SBA designates qualified Certified Development Companies and delegates to them increased authority to process, close, service, and liquidate 504 loans. A CDC must already meet SBA’s Accredited Lenders Program standards to qualify, and SBA generally grants the status for two years at a time. For borrowers, that means fewer handoffs between AmPac and SBA on the way to approval.
The quickest files are also the most complete. AmPac’s 504 program page lists the personal and business documents to gather before you apply, from three years of tax returns to a current balance sheet, so your file doesn’t stall waiting on paperwork. It also pays to reach out to an SBA expert like AmPac early. Before you start shopping for a building, our team can review certain financials, help you determine whether you’re qualified and eligible, and offer a pre-qualification.
Don’t let a myth make the decision
Each of these fears starts with something real. A 20% or greater down payment applies to some projects, a bank’s “No” is final for some loans, and fast money fills some needs. None of them is the whole story, and the SBA loan requirements are often friendlier than the rumors and myths.
AmPac serves businesses across California, Arizona, and Nevada with SBA 504 loans, 7(a) Community Advantage loans, SBA Microloans, and, in California, down payment assistance. If one of these myths has kept you from asking, start a conversation with our team of SBA lending experts or call (909) 915-1706. The answer may be far less frightening than you expect.