{"ok":true,"canonical_url":"https://dealroom.so/for-lenders/questions/can-a-seller-note-for-a-1-000-000-business-acquisition-be-on-partial-standby-for-the-sba-7","api_url":"https://dealroom.so/api/public/questions/can-a-seller-note-for-a-1-000-000-business-acquisition-be-on-partial-standby-for-the-sba-7","question":"Can a seller note for a $1,000,000 business acquisition be on partial standby for the SBA 7(a) loan?","topic":"Standby Agreements","audience":"lender","bot_mode":"lender","short_answer":"Yes, a seller note can be on partial standby, allowing for deferred principal payments but permitting interest payments to the seller during the SBA 7(a) loan's term.","rule":"Partial standby allows for flexibility. The note is subordinate to the SBA loan regarding principal payments (typically for a specified period, like 24 months), but interest payments to the seller are generally permitted. This structure can help bridge a financing gap while still providing the seller with some income.","example":"A $1,000,000 business acquisition includes a $100,000 seller note. The lender places this note on partial standby, requiring no principal payments for 24 months, but allowing interest payments at 5% per annum to the seller during this period, after which regular principal and interest payments would resume.","what_lenders_check":"Lenders must clearly define the terms of partial standby in the subordination agreement, specifying when principal payments can begin and ensuring interest payments don't unduly strain the borrower's cash flow or jeopardize the SBA loan's repayment.","required_facts":["Partial standby","Seller note","Principal deferment","Interest payments allowed","Subordination agreement"],"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":"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 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 Acquisition","url":"https://dealroom.so/glossary/partial-acquisition"},{"term":"Standby Note","url":"https://dealroom.so/glossary/standby-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/for-lenders/questions/can-a-seller-note-for-a-1-000-000-business-acquisition-be-on-partial-standby-for-the-sba-7","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."]}