{"ok":true,"canonical_url":"https://dealroom.so/glossary/subordinated-seller-note","api_url":"https://dealroom.so/api/public/glossary/subordinated-seller-note","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-seller-note","term":"Subordinated Seller Note","group":"Doing the deal","definition":"A loan from the seller to the buyer, paid back after the SBA loan. The SBA loan gets paid first if the business struggles, making this a \"junior\" debt.","what_it_means":"Many 7(a) deals include a seller note to bridge the gap between your cash injection, the SBA loan, and the purchase price. For it to count as \"capital at risk\" (equity) by the SBA, it must be fully subordinated to the SBA loan, meaning the seller cannot receive payments until the SBA loan is repaid, or only under strict conditions defined by a standby agreement.","url":"https://dealroom.so/glossary/subordinated-seller-note","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":"capital-at-risk","term":"Capital at Risk","url":"https://dealroom.so/glossary/capital-at-risk"},{"slug":"equity-injection","term":"Equity injection","url":"https://dealroom.so/glossary/equity-injection"}],"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 Seller Note","url":"https://dealroom.so/glossary/subordinated-seller-note","source_type":"DealRoom Data"}}