{"ok":true,"canonical_url":"https://dealroom.so/for-lenders/questions/can-a-seller-note-on-partial-standby-count-towards-the-borrower-s-equity-injection-for-a-7","api_url":"https://dealroom.so/api/public/questions/can-a-seller-note-on-partial-standby-count-towards-the-borrower-s-equity-injection-for-a-7","question":"Can a seller note on partial standby count towards the borrower's equity injection for a 7(a) loan?","topic":"Standby agreements","audience":"lender","bot_mode":"lender","short_answer":"No, a seller note on partial standby cannot count towards the borrower's minimum equity injection requirement for a 7(a) loan.","rule":"For a seller note to qualify as equity injection, it must be on 'full standby,' meaning no principal or interest payments can be made for the entire term of the SBA loan. A 'partial standby' note, which allows for some payments (e.g., interest-only or deferred principal for a period), is considered debt and does not contribute to the borrower's equity calculation.","example":"A borrower needs $100,000 equity. They have $70,000 cash and the seller offers a $30,000 note on partial standby (interest-only payments for 2 years). The $30,000 cannot count as equity, leaving the borrower with a $30,000 equity shortfall.","what_lenders_check":"Lenders must carefully review the terms of all seller notes. Incorrectly classifying a partial standby note as equity can lead to an eligibility issue and a guaranty repair or denial.","required_facts":["Seller note","Partial standby","Equity injection","Full standby","Debt classification"],"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":"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":"Seller's equity","url":"https://dealroom.so/glossary/seller-s-equity"},{"term":"Partial Standby Agreement","url":"https://dealroom.so/glossary/partial-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-partial-standby-count-towards-the-borrower-s-equity-injection-for-a-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."]}