{"ok":true,"canonical_url":"https://dealroom.so/glossary/sba-subordination-requirement","api_url":"https://dealroom.so/api/public/glossary/sba-subordination-requirement","data_freshness":{"sba_records_through":"2026-05-31","fdic_records_through":"2026-03-31","dealroom_last_updated":"2026-06-15","timezone":"America/Chicago"},"source_summary":["Public SBA 7(a) loan records","FDIC institution data","DealRoom lender and franchise enrichment"],"term":{"slug":"sba-subordination-requirement","term":"SBA subordination requirement","group":"The loan itself","definition":"This means any seller financing or other debt in your deal must take a backseat to the SBA loan. The SBA must be paid first if the business fails.","what_it_means":"For an SBA 7(a) loan, any seller note or other debt remaining in the business must be \"subordinated\" to the SBA loan. This means the SBA loan gets paid back before any other debt in the event of default or liquidation. This is formalized through a standby agreement, where the seller agrees not to receive payments on their note until the SBA loan is repaid.","url":"https://dealroom.so/glossary/sba-subordination-requirement","official_sources":[{"slug":"13-cfr-part-120","title":"13 CFR Part 120 — Business Loans","official_url":"https://www.ecfr.gov/current/title-13/chapter-I/part-120","official_label":"View on eCFR","authority_tier":1,"publisher":"Office of the Federal Register","source_guide_url":"https://dealroom.so/sba-7a/sources/13-cfr-part-120"},{"slug":"sop-50-10","title":"SOP 50 10 — Lender and Development Company Loan Programs","official_url":"https://www.sba.gov/document/sop-50-10-lender-development-company-loan-programs","official_label":"View on SBA.gov","authority_tier":2,"publisher":"U.S. Small Business Administration","source_guide_url":"https://dealroom.so/sba-7a/sources/sop-50-10"}],"related":[{"slug":"seller-note","term":"Seller note","url":"https://dealroom.so/glossary/seller-note"},{"slug":"standby","term":"Standby","url":"https://dealroom.so/glossary/standby"},{"slug":"subordinated-debt","term":"Subordinated Debt","url":"https://dealroom.so/glossary/subordinated-debt"},{"slug":"standby-agreement","term":"Standby agreement","url":"https://dealroom.so/glossary/standby-agreement"}],"related_questions":[{"question":"What are the lien subordination requirements for a seller note on full standby in a 7(a) acquisition?","url":"https://dealroom.so/for-lenders/questions/what-are-the-lien-subordination-requirements-for-a-seller-note-on-full-standby-in-a-7-a-ac"},{"question":"When is a lender required to obtain a subordination agreement for existing business debt?","url":"https://dealroom.so/for-lenders/questions/when-is-a-lender-required-to-obtain-a-subordination-agreement-for-existing-business-debt"},{"question":"What specific language is required in a seller note subordination agreement for SBA 7(a) loan approval?","url":"https://dealroom.so/sba-7a/questions/what-specific-language-is-required-in-a-seller-note-subordination-agreement-for-sba-7-a-lo"},{"question":"If I use a seller note as part of my equity, what are the specific subordination terms required?","url":"https://dealroom.so/sba-7a/questions/if-i-use-a-seller-note-as-part-of-my-equity-what-are-the-specific-subordination-terms-requ"},{"question":"What documentation is specifically required for a lender to demonstrate proper subordination of a seller note on full standby?","url":"https://dealroom.so/for-lenders/questions/what-documentation-is-specifically-required-for-a-lender-to-demonstrate-proper-subordinati"},{"question":"What specific language is required in a seller note's subordination agreement to ensure it counts as full standby equity?","url":"https://dealroom.so/for-lenders/questions/what-specific-language-is-required-in-a-seller-note-s-subordination-agreement-to-ensure-it"}]},"caveats":["Definitions represent DealRoom's plain-English interpretation for buyers; verify regulatory terms against the official SBA and eCFR sources listed.","Not legal, tax, or financial advice, and not an SBA eligibility determination."],"citation":{"label":"DealRoom.so Glossary — SBA subordination requirement","url":"https://dealroom.so/glossary/sba-subordination-requirement","source_type":"DealRoom Data"}}