{"ok":true,"canonical_url":"https://dealroom.so/sba-loans/basics/can-a-seller-note-count-as-part-of-my-equity-injection-for-a-business-acquisition","api_url":"https://dealroom.so/api/public/questions/can-a-seller-note-count-as-part-of-my-equity-injection-for-a-business-acquisition","question":"Can a seller note count as part of my equity injection for a business acquisition?","topic":"Down payment & equity injection","audience":"new","bot_mode":"buyer","short_answer":"Yes, a seller note can count towards the equity injection for a business acquisition, but only if it is on 'full standby' with no payments of principal or interest allowed until the SBA loan is repaid.","rule":"SBA rules dictate that for a seller note to qualify as equity injection, it must be on 'full standby.' This means the seller cannot receive any payments (principal or interest) for the life of the SBA loan. This structure ensures that all available cash flow goes towards servicing the SBA loan first.","example":"A $1,000,000 business acquisition requires $100,000 in equity. The buyer provides $50,000 cash, and the seller agrees to a $50,000 seller note that will not be paid until the 7(a) loan is satisfied. This qualifies as a 10% equity injection.","what_lenders_check":"Lenders must ensure the seller note is properly documented and legally enforceable as a full standby instrument. They scrutinize the terms to confirm no payments, direct or indirect, will be made to the seller until the SBA loan is fully satisfied.","required_facts":["Full standby required","No principal payments","No interest payments","SBA loan first priority","Business acquisition"],"source_families":["SOP 50 10 - Lender and Development Company Loan Programs","13 CFR Part 120 - Business Loans","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":"13 CFR Part 120 - Business Loans","url":"https://www.ecfr.gov/current/title-13/chapter-I/part-120"},{"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":"Can I use retirement funds from a 401(k) as equity injection for a $750,000 business purchase?","url":"https://dealroom.so/sba-loans/basics/can-i-use-retirement-funds-from-a-401-k-as-equity-injection-for-a-750-000-business-purchas"},{"question":"Can funds from a home equity line of credit (HELOC) be used as my equity injection for a business acquisition?","url":"https://dealroom.so/sba-loans/basics/can-funds-from-a-home-equity-line-of-credit-heloc-be-used-as-my-equity-injection-for-a-bus"},{"question":"Is it possible to use a second mortgage on my personal residence as an equity injection for a $1.5 million business acquisition?","url":"https://dealroom.so/sba-loans/basics/is-it-possible-to-use-a-second-mortgage-on-my-personal-residence-as-an-equity-injection-fo"},{"question":"How much cash must I personally inject for an SBA 7(a) business acquisition?","url":"https://dealroom.so/sba-loans/basics/how-much-cash-must-i-personally-inject-for-an-sba-7-a-business-acquisition"},{"question":"What are the acceptable sources for my cash equity injection beyond personal savings?","url":"https://dealroom.so/sba-loans/basics/what-are-the-acceptable-sources-for-my-cash-equity-injection-beyond-personal-savings"},{"question":"What is the SBA's minimum required equity injection percentage for a business acquisition?","url":"https://dealroom.so/sba-loans/basics/what-is-the-sba-s-minimum-required-equity-injection-percentage-for-a-business-acquisition"}],"related_terms":[{"term":"Seller note","url":"https://dealroom.so/glossary/seller-note"},{"term":"Equity injection","url":"https://dealroom.so/glossary/equity-injection"},{"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":"Business acquisition","url":"https://dealroom.so/glossary/business-acquisition"}],"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":"2026-06-14","sba_rule_sources_checked_through":"2026-06-14"},"citation":{"label":"DealRoom.so SBA 7(a) Q&A","url":"https://dealroom.so/sba-loans/basics/can-a-seller-note-count-as-part-of-my-equity-injection-for-a-business-acquisition","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."]}