{"ok":true,"canonical_url":"https://dealroom.so/for-lenders/questions/can-a-partial-standby-seller-note-include-a-provision-for-interest-payments-during-the-sta","api_url":"https://dealroom.so/api/public/questions/can-a-partial-standby-seller-note-include-a-provision-for-interest-payments-during-the-sta","question":"Can a partial standby seller note include a provision for interest payments during the standby period?","topic":"Standby Agreements","audience":"lender","bot_mode":"lender","short_answer":"Yes, a partial standby seller note can include a provision for interest-only payments during the standby period, but no principal payments are allowed until the SBA loan is fully repaid.","rule":"With a partial standby agreement, the seller note may allow for interest-only payments during the SBA loan's term. However, all principal payments on the seller note must be explicitly subordinated and deferred until the SBA loan is fully repaid. The lender must ensure the interest payments are sustainable and do not impair the borrower's ability to service the SBA debt.","example":"A borrower secures a $600,000 SBA loan. A $100,000 seller note is on partial standby, allowing for $500 monthly interest payments. The lender ensures the partial standby agreement explicitly prohibits principal repayment until the SBA loan is satisfied and verifies the business's cash flow can comfortably support both the SBA loan and the seller note's interest.","what_lenders_check":"Lenders must meticulously review partial standby agreements to confirm no principal payments are made during the SBA loan's term. They also need to assess the financial impact of interest-only payments on the borrower's cash flow, ensuring it doesn't compromise the ability to repay the SBA loan. Any deviation can lead to a guaranty repair.","required_facts":["Partial standby","Seller note","Interest-only payments","Principal deferral","Cash flow impact"],"source_families":["SOP 50 10 - Lender and Development Company Loan Programs","7(a) Loan Program Terms, Conditions, and Eligibility"],"official_sources":[{"title":"SOP 50 10 - Lender and Development Company Loan Programs","url":"https://www.sba.gov/sites/default/files/2025-05/SOP%2050%2010%208%20Technical%20Updates%20effective%206.1.2025.docx"},{"title":"7(a) Loan Program Terms, Conditions, and Eligibility","url":"https://www.sba.gov/partners/lenders/7a-loan-program/terms-conditions-eligibility"}],"related_questions":[{"question":"What specific documentation does a lender need to confirm full standby status for a seller note in an acquisition?","url":"https://dealroom.so/for-lenders/questions/what-specific-documentation-does-a-lender-need-to-confirm-full-standby-status-for-a-seller"},{"question":"How does a lender verify the full standby status of a non-SBA debt to ensure eligibility for a 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/how-does-a-lender-verify-the-full-standby-status-of-a-non-sba-debt-to-ensure-eligibility-f"},{"question":"What specific conditions allow a seller note with deferred principal payments but immediate interest to qualify as full standby?","url":"https://dealroom.so/for-lenders/questions/what-specific-conditions-allow-a-seller-note-with-deferred-principal-payments-but-immediat"},{"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":"How does a lender verify a seller note's full standby status for 7(a) equity injection compliance?","url":"https://dealroom.so/for-lenders/questions/how-does-a-lender-verify-a-seller-note-s-full-standby-status-for-7-a-equity-injection-comp"},{"question":"What are the key requirements for a seller note to qualify as \"full standby\" for equity injection purposes in a 7(a) acquisition?","url":"https://dealroom.so/for-lenders/questions/what-are-the-key-requirements-for-a-seller-note-to-qualify-as-full-standby-for-equity-inje"}],"related_terms":[{"term":"Partial Standby Seller Note","url":"https://dealroom.so/glossary/partial-standby-seller-note"},{"term":"Seller standby note","url":"https://dealroom.so/glossary/seller-standby-note"},{"term":"Standby seller note","url":"https://dealroom.so/glossary/standby-seller-note"},{"term":"Seller note on standby","url":"https://dealroom.so/glossary/seller-note-on-standby"},{"term":"Standby Note","url":"https://dealroom.so/glossary/standby-note"},{"term":"Standby Period","url":"https://dealroom.so/glossary/standby-period"}],"related_tools":[{"name":"SBA 7(a) payment & fee calculator","url":"https://dealroom.so/sba-7a/calculator"},{"name":"Find an active SBA 7(a) lender","url":"https://dealroom.so/lenders"}],"data_freshness":{"last_reviewed":"2026-06-13","sba_rule_sources_checked_through":"2026-06-13"},"citation":{"label":"DealRoom.so SBA 7(a) Q&A","url":"https://dealroom.so/for-lenders/questions/can-a-partial-standby-seller-note-include-a-provision-for-interest-payments-during-the-sta","source_type":"DealRoom Q&A"},"caveats":["Grounded in the current SBA rulebook; verify against official sources before relying on it for a live deal.","Not legal, tax, or financial advice and not an approval decision."]}