{"ok":true,"canonical_url":"https://dealroom.so/sba-7a/questions/can-a-seller-note-be-partially-on-standby-with-a-portion-paid-monthly-and-the-rest-deferre","api_url":"https://dealroom.so/api/public/questions/can-a-seller-note-be-partially-on-standby-with-a-portion-paid-monthly-and-the-rest-deferre","question":"Can a seller note be partially on standby, with a portion paid monthly and the rest deferred, to count as equity?","topic":"Seller notes & standby","audience":"borrower","bot_mode":"buyer","short_answer":"No, a seller note that is partially on standby, allowing any payments (principal or interest) before the SBA loan is repaid, cannot count towards the buyer's required equity injection.","rule":"To be recognized as equity injection by the SBA, a seller note must be on full standby, meaning no payments of principal or interest are permitted until the SBA loan is fully satisfied. Any arrangement for partial payments means the note does not provide true risk capital equivalent to equity.","example":"A buyer needs $100,000 in equity. A seller offers a $50,000 note where $25,000 is on full standby, and $25,000 allows monthly payments. Only the $25,000 on full standby could potentially count, but the blended nature usually makes the entire note ineligible as standby equity. The buyer would still need to find alternative equity sources.","what_lenders_check":"Lenders require clear and unambiguous full standby documentation. A mixed-payment structure introduces complexity and undermines the essential 'no payments until the SBA loan is paid' principle, making it ineligible as equity.","required_facts":["Partial standby","Full standby requirement","No payments rule","Equity eligibility","Seller note structure"],"source_families":["SOP 50 10 - Lender and Development Company Loan Programs","13 CFR Part 120 - Business Loans"],"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":"13 CFR Part 120 - Business Loans","url":"https://www.ecfr.gov/current/title-13/chapter-I/part-120"}],"related_questions":[{"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":"For a $900,000 business acquisition, what percentage of the total required equity injection can come from a fully subordinated seller note?","url":"https://dealroom.so/sba-7a/questions/for-a-900-000-business-acquisition-what-percentage-of-the-total-required-equity-injection-"},{"question":"Can a seller who takes a fully subordinated note also remain an employee or consultant of the business after the acquisition?","url":"https://dealroom.so/sba-7a/questions/can-a-seller-who-takes-a-fully-subordinated-note-also-remain-an-employee-or-consultant-of-"},{"question":"How does an earn-out provision affect an SBA 7(a) loan for a business acquisition?","url":"https://dealroom.so/sba-7a/questions/how-does-an-earn-out-provision-affect-an-sba-7-a-loan-for-a-business-acquisition"},{"question":"What is the minimum term duration a seller note must be on full standby for an SBA loan?","url":"https://dealroom.so/sba-7a/questions/what-is-the-minimum-term-duration-a-seller-note-must-be-on-full-standby-for-an-sba-loan"},{"question":"Can interest be accrued and paid on a seller note while it is on full standby?","url":"https://dealroom.so/sba-7a/questions/can-interest-be-accrued-and-paid-on-a-seller-note-while-it-is-on-full-standby"}],"related_terms":[{"term":"Seller note on standby","url":"https://dealroom.so/glossary/seller-note-on-standby"},{"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":"Partial Standby Seller Note","url":"https://dealroom.so/glossary/partial-standby-seller-note"},{"term":"Standby Note","url":"https://dealroom.so/glossary/standby-note"},{"term":"Seller note","url":"https://dealroom.so/glossary/seller-note"}],"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/sba-7a/questions/can-a-seller-note-be-partially-on-standby-with-a-portion-paid-monthly-and-the-rest-deferre","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."]}