{"ok":true,"canonical_url":"https://dealroom.so/glossary/subordinated-in-payment","api_url":"https://dealroom.so/api/public/glossary/subordinated-in-payment","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":"subordinated-in-payment","term":"Subordinated in payment","group":"Your money in the deal","definition":"This means a debt, like a seller note, is legally junior to the SBA loan. The SBA lender gets paid first in case of default, ensuring their primary position.","what_it_means":"Any seller note or other debt considered part of your equity injection must be fully subordinated in payment to the SBA loan. This is enforced through a Standby Agreement, which dictates that the seller can't receive principal or interest payments until the SBA loan is repaid or specific conditions are met. This protects the lender's collateral position.","url":"https://dealroom.so/glossary/subordinated-in-payment","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-agreement","term":"Standby agreement","url":"https://dealroom.so/glossary/standby-agreement"},{"slug":"equity-injection","term":"Equity injection","url":"https://dealroom.so/glossary/equity-injection"},{"slug":"full-standby-agreement","term":"Full Standby Agreement","url":"https://dealroom.so/glossary/full-standby-agreement"}],"related_questions":[{"question":"Can the seller receive interest payments on a fully subordinated seller note during the SBA loan term?","url":"https://dealroom.so/sba-7a/questions/can-the-seller-receive-interest-payments-on-a-fully-subordinated-seller-note-during-the-sb"},{"question":"If a seller takes a fully subordinated note, can they remain an employee or consultant after acquisition?","url":"https://dealroom.so/sba-7a/questions/if-a-seller-takes-a-fully-subordinated-note-can-they-remain-an-employee-or-consultant-afte"},{"question":"What happens if the seller's standby note is not properly subordinated or documented by the closing date?","url":"https://dealroom.so/sba-7a/questions/what-happens-if-the-seller-s-standby-note-is-not-properly-subordinated-or-documented-by-th"},{"question":"If a seller note is on full standby, can it be subordinated to a different, non-SBA loan simultaneously?","url":"https://dealroom.so/sba-7a/questions/if-a-seller-note-is-on-full-standby-can-it-be-subordinated-to-a-different-non-sba-loan-sim"},{"question":"How does a lender evaluate the reasonableness of a business purchase price when the seller note is fully subordinated?","url":"https://dealroom.so/for-lenders/questions/how-does-a-lender-evaluate-the-reasonableness-of-a-business-purchase-price-when-the-seller"},{"question":"What are the conditions under which a seller note on full standby can be subordinated to other non-SBA debt?","url":"https://dealroom.so/for-lenders/questions/what-are-the-conditions-under-which-a-seller-note-on-full-standby-can-be-subordinated-to-o"}]},"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 — Subordinated in payment","url":"https://dealroom.so/glossary/subordinated-in-payment","source_type":"DealRoom Data"}}