{"ok":true,"canonical_url":"https://dealroom.so/sba-7a/questions/can-a-seller-note-be-used-to-buy-out-a-partner-and-must-it-be-on-standby","api_url":"https://dealroom.so/api/public/questions/can-a-seller-note-be-used-to-buy-out-a-partner-and-must-it-be-on-standby","question":"Can a seller note be used to buy out a partner, and must it be on standby?","topic":"Partner & owner buyout","audience":"borrower","bot_mode":"buyer","short_answer":"Yes, a seller note can be used in a partner buyout, and if it is to count towards the equity injection or reduce the SBA loan amount, it must be on full standby.","rule":"For a seller note to qualify as equity injection or reduce the required SBA loan amount, it must be on 'full standby.' This means no principal or interest payments can be made on the seller note until the SBA loan is fully repaid. This strengthens the borrower's position and reduces risk for the SBA.","example":"If a $1,000,000 partner buyout includes a $100,000 seller note, that note must be on full standby for it to count as the required 10% equity injection. The remaining $900,000 would be financed by the SBA loan, with no payments made on the seller note until the SBA loan is satisfied.","what_lenders_check":"Lenders require a clear standby agreement signed by the seller, explicitly stating no payments (principal or interest) will be made until the SBA loan is paid in full. They confirm the seller is not an affiliate and that the standby terms are legally enforceable.","required_facts":["Seller note possible","Full standby required","No payments allowed","Strengthens borrower position"],"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/document/sop-50-10-lender-development-company-loan-programs"},{"title":"13 CFR Part 120 — Business Loans","url":"https://www.ecfr.gov/current/title-13/chapter-I/part-120"}],"related_questions":[{"question":"Can I buy out my business partner with an SBA 7(a) loan?","url":"https://dealroom.so/sba-7a/questions/can-i-buy-out-my-business-partner-with-an-sba-7-a-loan"},{"question":"Can a partner buyout be done with zero money down under the SBA?","url":"https://dealroom.so/sba-7a/questions/can-a-partner-buyout-be-done-with-zero-money-down-under-the-sba"},{"question":"What is the 24-month ownership rule for a $0-down SBA partner buyout?","url":"https://dealroom.so/sba-7a/questions/what-is-the-24-month-ownership-rule-for-a-0-down-sba-partner-buyout"},{"question":"Is a partner buyout a complete or partial change of ownership for the SBA?","url":"https://dealroom.so/sba-7a/questions/is-a-partner-buyout-a-complete-or-partial-change-of-ownership-for-the-sba"},{"question":"Does the remaining owner have to personally guarantee the SBA loan after a buyout?","url":"https://dealroom.so/sba-7a/questions/does-the-remaining-owner-have-to-personally-guarantee-the-sba-loan-after-a-buyout"},{"question":"Can the company itself redeem the departing partner's shares with an SBA loan?","url":"https://dealroom.so/sba-7a/questions/can-the-company-itself-redeem-the-departing-partner-s-shares-with-an-sba-loan"}],"related_terms":[{"term":"Seller note on standby","url":"https://dealroom.so/glossary/seller-note-on-standby"},{"term":"Seller note","url":"https://dealroom.so/glossary/seller-note"},{"term":"Seller standby note","url":"https://dealroom.so/glossary/seller-standby-note"},{"term":"Subordinated Seller Note","url":"https://dealroom.so/glossary/subordinated-seller-note"},{"term":"Standby seller note","url":"https://dealroom.so/glossary/standby-seller-note"},{"term":"Buyout of a Partner","url":"https://dealroom.so/glossary/buyout-of-a-partner"}],"related_tools":[{"name":"Partner Buyout toolkit","url":"https://dealroom.so/sba-7a/partner-buyout"},{"name":"Find an active SBA 7(a) lender","url":"https://dealroom.so/lenders"}],"data_freshness":{"last_reviewed":"2026-06-15","sba_rule_sources_checked_through":"2026-06-15"},"citation":{"label":"DealRoom.so SBA 7(a) Q&A","url":"https://dealroom.so/sba-7a/questions/can-a-seller-note-be-used-to-buy-out-a-partner-and-must-it-be-on-standby","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."]}