{"id":208604,"date":"2025-09-22T06:40:10","date_gmt":"2025-09-22T13:40:10","guid":{"rendered":"https:\/\/www.nationalfunding.com\/blog\/?p=208604"},"modified":"2025-09-19T17:40:25","modified_gmt":"2025-09-20T00:40:25","slug":"the-reasons-lenders-require-deposits-on-business-loans","status":"publish","type":"post","link":"https:\/\/www.nationalfunding.com\/blog\/the-reasons-lenders-require-deposits-on-business-loans\/","title":{"rendered":"The Reasons Lenders Require Deposits on Business Loans"},"content":{"rendered":"<p><span data-contrast=\"auto\">Lenders require a deposit, also known as an equity injection, on a <\/span><a href=\"https:\/\/www.nationalfunding.com\/small-business-loans\/\"><span data-contrast=\"none\">business loan<\/span><\/a><span data-contrast=\"auto\"> between 10% and 35%, depending on the type of business loan. This is a way to recover some of the losses if the borrower defaults on the business loan. Loan deposits are standard procedure when taking either large or small amounts of financing and are often a typical policy for most lenders.<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span data-ccp-props=\"{}\">\u00a0<\/span><span data-contrast=\"auto\">Alternative lenders and traditional banks normally require between 10% and 15% of the loan amount as a deposit. This includes SBA loans. The actual amount will be based on your credit history, finances, the use of the loan, the value of the collateral you offer, and your time in business. These factors apply for standard small business loans like <\/span><a href=\"https:\/\/www.nationalfunding.com\/solutions\/working-capital-loans\/\"><span data-contrast=\"none\">working capital<\/span><\/a><span data-contrast=\"auto\"> and <\/span><a href=\"https:\/\/www.nationalfunding.com\/equipment-leasing\/\"><span data-contrast=\"none\">equipment financing<\/span><\/a><span data-contrast=\"auto\">.<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span data-ccp-props=\"{}\">\u00a0<\/span><span data-contrast=\"auto\">Commercial real estate business loans may require up to 35% of the loan price and the property as collateral, as the investment is riskier than other uses for financing.\u00a0\u00a0<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">On rare occasions where the business has an existing relationship with the lender and substantial cash flows, the amount could be around 5% or potentially waived. This is called a no-deposit-down business loan, which is like an unsecured business loan. The option is rare and normally only happens when the borrower has built-in trust with the lender from previous loans. Another common feature of this type of financing is that the payback period is typically shorter to reduce the lender&#8217;s risk.<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<h2 aria-level=\"2\"><span data-contrast=\"auto\">Deposits Are About Reducing the Lender\u2019s Risk<\/span><span data-ccp-props=\"{&quot;134245418&quot;:true,&quot;134245529&quot;:true,&quot;335559738&quot;:360,&quot;335559739&quot;:120}\">\u00a0<\/span><\/h2>\n<p><span data-contrast=\"auto\">Deposits are about reducing lender risk by:<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<ul>\n<li aria-setsize=\"-1\" data-leveltext=\"\u25cf\" data-font=\"\" data-listid=\"1\" data-list-defn-props=\"{&quot;335552541&quot;:1,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769242&quot;:[8226],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;\u25cf&quot;,&quot;469777815&quot;:&quot;multilevel&quot;}\" data-aria-posinset=\"1\" data-aria-level=\"1\"><span data-contrast=\"auto\">Showing you\u2019re committed to your business and are more likely to pay the loan back.<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/li>\n<\/ul>\n<ul>\n<li aria-setsize=\"-1\" data-leveltext=\"\u25cf\" data-font=\"\" data-listid=\"1\" data-list-defn-props=\"{&quot;335552541&quot;:1,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769242&quot;:[8226],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;\u25cf&quot;,&quot;469777815&quot;:&quot;multilevel&quot;}\" data-aria-posinset=\"2\" data-aria-level=\"1\"><span data-contrast=\"auto\">Reducing the loan-to-value ratio which helps to make the deal more secure.<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/li>\n<\/ul>\n<ul>\n<li aria-setsize=\"-1\" data-leveltext=\"\u25cf\" data-font=\"\" data-listid=\"1\" data-list-defn-props=\"{&quot;335552541&quot;:1,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769242&quot;:[8226],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;\u25cf&quot;,&quot;469777815&quot;:&quot;multilevel&quot;}\" data-aria-posinset=\"3\" data-aria-level=\"1\"><span data-contrast=\"auto\">Having a non-depreciating asset as collateral, unlike a vehicle which can lose value.<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/li>\n<\/ul>\n<ul>\n<li aria-setsize=\"-1\" data-leveltext=\"\u25cf\" data-font=\"\" data-listid=\"1\" data-list-defn-props=\"{&quot;335552541&quot;:1,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769242&quot;:[8226],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;\u25cf&quot;,&quot;469777815&quot;:&quot;multilevel&quot;}\" data-aria-posinset=\"4\" data-aria-level=\"1\"><span data-contrast=\"auto\">Discouraging a business owner from borrowing more than they need, as the deposit increases with the total loan amount.<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/li>\n<\/ul>\n<ul>\n<li aria-setsize=\"-1\" data-leveltext=\"\u25cf\" data-font=\"\" data-listid=\"1\" data-list-defn-props=\"{&quot;335552541&quot;:1,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769242&quot;:[8226],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;\u25cf&quot;,&quot;469777815&quot;:&quot;multilevel&quot;}\" data-aria-posinset=\"5\" data-aria-level=\"1\"><span data-contrast=\"auto\">Mitigating costs in the case of default.\u00a0<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/li>\n<\/ul>\n<p><span data-contrast=\"auto\">It may seem counterintuitive to give money to the lender when you\u2019re there to borrow money, but the amount you put down can get you better loan terms.\u00a0\u00a0<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<h2 aria-level=\"2\"><span data-contrast=\"auto\">Larger Deposits Can Get You Better Business Loan Terms<\/span><span data-ccp-props=\"{&quot;134245418&quot;:true,&quot;134245529&quot;:true,&quot;335559738&quot;:360,&quot;335559739&quot;:120}\">\u00a0<\/span><\/h2>\n<p><span data-contrast=\"auto\">The larger the deposit you make, the less risk there is for the lender and the more you show you have<\/span><i><span data-contrast=\"auto\"> \u201cskin in the game.\u201d<\/span><\/i><span data-contrast=\"auto\">\u00a0 When you put more money into the deposit, you may be able to negotiate a lower interest rate.<\/span><span data-ccp-props=\"{&quot;335559738&quot;:240,&quot;335559739&quot;:240}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Interest rates are how the lender makes their money. If you\u2019re a higher-risk borrower, they\u2019ll charge a higher interest rate because there is more of a risk you could default. By putting a larger deposit down, you reduce your risk. The payback period can also be negotiated.<\/span><span data-ccp-props=\"{&quot;335559738&quot;:240,&quot;335559739&quot;:240}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">By reducing the time you have to pay the loan back, you can clear the debt from your business credit reports earlier (if reported) and potentially help your business credit score. You can also use <\/span><a href=\"https:\/\/www.nationalfunding.com\/blog\/a-guide-to-curtailments-how-to-make-them-work-for-you\/\"><span data-contrast=\"none\">curtailments<\/span><\/a><span data-contrast=\"auto\"> or prepayments to accomplish this.<\/span><span data-ccp-props=\"{&quot;335559738&quot;:240,&quot;335559739&quot;:240}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Note: When you make early payments and clear the business debt sooner than expected, this can impact the lender\u2019s profits. This is why they may charge you prepayment penalties. However, by putting a larger deposit down, you have room to negotiate that penalty out.<\/span><span data-ccp-props=\"{&quot;335559738&quot;:240,&quot;335559739&quot;:240}\">\u00a0<\/span><\/p>\n<p><b><span data-contrast=\"auto\">Pro-tip:<\/span><\/b><span data-contrast=\"auto\"> National Funding doesn\u2019t require down payments and doesn\u2019t have prepayment penalties for paying off your financing early. In fact, you can take advantage of major savings with our early payoff discounts<a href=\"#disclosures\">1 <\/a><\/span><a href=\"https:\/\/www.nationalfunding.com\/application\/apply-now\/\"><span data-contrast=\"none\">Fill out our application form to explore your options and learn more about our discounts today.<\/span><\/a><span data-ccp-props=\"{&quot;335559738&quot;:240,&quot;335559739&quot;:240}\">\u00a0<\/span><\/p>\n<h2 aria-level=\"2\"><span data-contrast=\"auto\">What Happens If You Don\u2019t Make a Deposit<\/span><span data-ccp-props=\"{&quot;134245418&quot;:true,&quot;134245529&quot;:true,&quot;335559738&quot;:240,&quot;335559739&quot;:240}\">\u00a0<\/span><\/h2>\n<p><span data-contrast=\"auto\">If you don\u2019t make the deposit on the business loan or cannot raise enough money, you\u2019re likely going to get declined. You could make a personal guarantee, which means the lender can seize personal assets to help offset their risk, or you could try to put more collateral down, but many lenders simply require deposits. That does not mean you cannot get financing.<\/span><span data-ccp-props=\"{}\"> \u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">If you cannot get approved for a business loan because you do not have the money for a deposit, you can try:<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<ul>\n<li aria-setsize=\"-1\" data-leveltext=\"\u25cf\" data-font=\"\" data-listid=\"2\" data-list-defn-props=\"{&quot;335552541&quot;:1,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769242&quot;:[8226],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;\u25cf&quot;,&quot;469777815&quot;:&quot;multilevel&quot;}\" data-aria-posinset=\"1\" data-aria-level=\"1\"><a href=\"https:\/\/www.nationalfunding.com\/blog\/how-invoice-factoring-works-and-when-it-makes-sense\/\"><span data-contrast=\"none\">Invoice factoring<\/span><\/a><span data-contrast=\"auto\"> where you sell invoices to a factoring company, which is a company that buys your invoices for a portion of what you are owed and collects the full amount from your customers.<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/li>\n<\/ul>\n<ul>\n<li aria-setsize=\"-1\" data-leveltext=\"\u25cf\" data-font=\"\" data-listid=\"2\" data-list-defn-props=\"{&quot;335552541&quot;:1,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769242&quot;:[8226],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;\u25cf&quot;,&quot;469777815&quot;:&quot;multilevel&quot;}\" data-aria-posinset=\"2\" data-aria-level=\"1\"><span data-contrast=\"auto\">Partnering with equity investors with a potential buyback where investors give you the money you need in exchange for partial ownership or a stake in your business. By having a buyback for a fee, you can retake control of your company, and the fee becomes profit for the investor.<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/li>\n<\/ul>\n<ul>\n<li aria-setsize=\"-1\" data-leveltext=\"\u25cf\" data-font=\"\" data-listid=\"2\" data-list-defn-props=\"{&quot;335552541&quot;:1,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769242&quot;:[8226],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;\u25cf&quot;,&quot;469777815&quot;:&quot;multilevel&quot;}\" data-aria-posinset=\"3\" data-aria-level=\"1\"><span data-contrast=\"auto\">Financing from your personal assets like your 401(K) or a home equity line of credit (HELOC) or selling off assets like bonds and stocks. When you do this, you have to feel confident the business will succeed as you won\u2019t have a safety net to fall back on.<\/span><\/li>\n<\/ul>\n<p><span data-contrast=\"auto\">Deposits are required on large and small business loans because the lender wants to reduce their risk, and it is likely a company policy to collect it. If you cannot raise the funds for the deposit, you\u2019ll need to find an alternative form of financing or apply for a smaller business loan.\u00a0 When you can make the deposit or have the ability to put a larger amount down, you can negotiate better terms including lower interest rates, reduced penalties, and shorter payback periods.<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><i><span data-contrast=\"none\">National Funding does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only. You should consult your own tax, legal and accounting advisors.<\/span><\/i><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Lenders require a deposit, also known as an equity injection, on a business loan between 10% and 35%, depending on the type of business loan. This is a way to recover some of the losses if the borrower defaults on the business loan. Loan deposits are standard procedure when taking either large or small amounts<a class=\"excerpt-read-more\" href=\"https:\/\/www.nationalfunding.com\/blog\/the-reasons-lenders-require-deposits-on-business-loans\/\" title=\"ReadThe Reasons Lenders Require Deposits on Business Loans\">&#8230; Read more &raquo;<\/a><\/p>\n","protected":false},"author":38,"featured_media":206090,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[23],"tags":[],"class_list":["post-208604","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance-lending"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.8 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>The Reasons Lenders Require Deposits on Business Loans - The Bottom Line by National Funding<\/title>\n<meta name=\"description\" content=\"Deposits aren\u2019t only about lessening a lender\u2019s risk; they show you have skin in the game. Knowing how to negotiate them can help you get a good deal.\u00a0\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.nationalfunding.com\/blog\/the-reasons-lenders-require-deposits-on-business-loans\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The Reasons Lenders Require Deposits on Business Loans - The Bottom Line by National Funding\" \/>\n<meta property=\"og:description\" content=\"Deposits aren\u2019t only about lessening a lender\u2019s risk; they show you have skin in the game. 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