{"ok":true,"canonical_url":"https://dealroom.so/glossary/subordinated-loan","api_url":"https://dealroom.so/api/public/glossary/subordinated-loan","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-loan","term":"Subordinated Loan","group":"The loan itself","definition":"A loan that ranks below other debts in terms of repayment priority. If the business defaults, other creditors get paid back before the subordinated lender.","what_it_means":"In an SBA 7(a) deal, a seller note is often structured as a subordinated loan to make the transaction more viable for the buyer and lender. The SBA requires a \"full standby\" or \"partial standby\" agreement, meaning the seller cannot receive principal payments on their loan until the SBA loan is repaid, or for a specified period. This strengthens the buyer's ability to repay the senior SBA debt.","url":"https://dealroom.so/glossary/subordinated-loan","official_sources":[{"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"},{"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"}],"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":"full-standby-agreement","term":"Full Standby Agreement","url":"https://dealroom.so/glossary/full-standby-agreement"},{"slug":"partial-standby-agreement","term":"Partial Standby Agreement","url":"https://dealroom.so/glossary/partial-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":"Can a subordinated loan from a private third-party investor count as equity injection for an SBA 7(a) loan?","url":"https://dealroom.so/sba-7a/questions/can-a-subordinated-loan-from-a-private-third-party-investor-count-as-equity-injection-for-"},{"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":"Can a personal loan from a non-owner family member count as equity if fully subordinated to the 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/can-a-personal-loan-from-a-non-owner-family-member-count-as-equity-if-fully-subordinated-t"},{"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"}]},"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 Loan","url":"https://dealroom.so/glossary/subordinated-loan","source_type":"DealRoom Data"}}