{"ok":true,"canonical_url":"https://dealroom.so/glossary/subordinate-lien","api_url":"https://dealroom.so/api/public/glossary/subordinate-lien","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":"subordinate-lien","term":"Subordinate Lien","group":"Doing the deal","definition":"This is a legal claim on an asset that ranks lower than another claim in terms of priority for repayment if the borrower defaults. Buyers typically see this when a seller note is used as part of the equity injection, making it subordinate to the SBA loan.","what_it_means":"The SBA requires any seller financing used for the buyer's equity injection to be on \"full standby\" or \"partial standby,\" which means it has a subordinate lien position to the SBA's first lien. This arrangement protects the SBA and your primary lender by ensuring they get paid first from collateral if the business fails.","url":"https://dealroom.so/glossary/subordinate-lien","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":"senior-lien-position","term":"Senior Lien Position","url":"https://dealroom.so/glossary/senior-lien-position"},{"slug":"full-standby-agreement","term":"Full Standby Agreement","url":"https://dealroom.so/glossary/full-standby-agreement"}],"related_questions":[{"question":"What if the seller wants to retain a subordinate lien on some business assets after the sale?","url":"https://dealroom.so/sba-7a/questions/what-if-the-seller-wants-to-retain-a-subordinate-lien-on-some-business-assets-after-the-sa"},{"question":"Can a seller note be subordinate to the SBA loan but still receive principal payments?","url":"https://dealroom.so/sba-7a/questions/can-a-seller-note-be-subordinate-to-the-sba-loan-but-still-receive-principal-payments"},{"question":"What happens if a seller note on standby is subordinate to another non-SBA debt?","url":"https://dealroom.so/sba-7a/questions/what-happens-if-a-seller-note-on-standby-is-subordinate-to-another-non-sba-debt"},{"question":"How long must a seller note be subordinate to the SBA loan for a business acquisition?","url":"https://dealroom.so/sba-7a/questions/how-long-must-a-seller-note-be-subordinate-to-the-sba-loan-for-a-business-acquisition"},{"question":"What are the specific requirements for a lender to obtain a valid first lien position on UCC collateral when prior liens exist?","url":"https://dealroom.so/for-lenders/questions/what-are-the-specific-requirements-for-a-lender-to-obtain-a-valid-first-lien-position-on-u"},{"question":"When must a lender take a lien on specific equipment for collateral, beyond a blanket lien?","url":"https://dealroom.so/for-lenders/questions/when-must-a-lender-take-a-lien-on-specific-equipment-for-collateral-beyond-a-blanket-lien"}]},"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 — Subordinate Lien","url":"https://dealroom.so/glossary/subordinate-lien","source_type":"DealRoom Data"}}