{"ok":true,"canonical_url":"https://dealroom.so/for-lenders/questions/can-a-seller-note-on-full-standby-still-be-secured-by-specific-business-assets-for-a-7-a-l","api_url":"https://dealroom.so/api/public/questions/can-a-seller-note-on-full-standby-still-be-secured-by-specific-business-assets-for-a-7-a-l","question":"Can a seller note on full standby still be secured by specific business assets for a 7(a) loan?","topic":"Standby agreements","audience":"lender","bot_mode":"lender","short_answer":"No, a seller note on full standby for an SBA 7(a) loan cannot be secured by any business assets; it must be completely unsecured and fully subordinated to the SBA loan.","rule":"To qualify as equity injection, a seller note on full standby must be fully subordinated and unsecured. If the seller retains any lien or security interest in the business assets, it would be considered a secured debt and not true equity, thus making it ineligible for counting towards the equity injection.","example":"A seller agrees to a $100,000 full standby note as part of an acquisition. The lender ensures the standby agreement explicitly states the note is unsecured and that the seller will not take any lien on the business's inventory or equipment.","what_lenders_check":"Lenders must scrutinize standby agreements and closing documents to ensure no hidden security interests are granted to the seller. Any secured standby note would lead to a guaranty repair or denial.","required_facts":["Standby note","Secured","Business assets","Unsecured requirement"],"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":"What documentation must a lender obtain to ensure a seller note is fully on standby and subordinated to the SBA 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/what-documentation-must-a-lender-obtain-to-ensure-a-seller-note-is-fully-on-standby-and-su"},{"question":"What specific financial covenants or conditions must be included in a seller note on full standby for a 7(a) acquisition loan?","url":"https://dealroom.so/for-lenders/questions/what-specific-financial-covenants-or-conditions-must-be-included-in-a-seller-note-on-full-"},{"question":"What specific language must a standby agreement for a seller note include to meet SBA 7(a) requirements for equity injection?","url":"https://dealroom.so/for-lenders/questions/what-specific-language-must-a-standby-agreement-for-a-seller-note-include-to-meet-sba-7-a-"},{"question":"What is the impact on an SBA 7(a) loan if a seller note on full standby is repaid prematurely without the lender's knowledge?","url":"https://dealroom.so/for-lenders/questions/what-is-the-impact-on-an-sba-7-a-loan-if-a-seller-note-on-full-standby-is-repaid-premature"},{"question":"What are the specific SBA requirements for a seller's note to be on full standby?","url":"https://dealroom.so/for-lenders/questions/what-are-the-specific-sba-requirements-for-a-seller-s-note-to-be-on-full-standby"},{"question":"What specific language must a non-SBA third-party standby agreement include to ensure eligibility?","url":"https://dealroom.so/for-lenders/questions/what-specific-language-must-a-non-sba-third-party-standby-agreement-include-to-ensure-elig"}],"related_terms":[{"term":"Seller note on standby","url":"https://dealroom.so/glossary/seller-note-on-standby"},{"term":"Seller Financing on Full Standby","url":"https://dealroom.so/glossary/seller-financing-on-full-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":"Full Standby Agreement","url":"https://dealroom.so/glossary/full-standby-agreement"}],"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-on-full-standby-still-be-secured-by-specific-business-assets-for-a-7-a-l","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."]}