{"ok":true,"canonical_url":"https://dealroom.so/sba-7a/questions/can-a-seller-note-with-a-5-year-full-standby-period-be-considered-part-of-the-equity-injec","api_url":"https://dealroom.so/api/public/questions/can-a-seller-note-with-a-5-year-full-standby-period-be-considered-part-of-the-equity-injec","question":"Can a seller note with a 5-year full standby period be considered part of the equity injection?","topic":"Seller notes & standby","audience":"borrower","bot_mode":"buyer","short_answer":"Yes, a seller note with a full standby period of at least two years, where no principal or interest payments are made, can be counted towards the buyer's equity injection.","rule":"SBA regulations permit seller notes on full standby to be treated as part of the buyer's equity injection if the note's terms include no payments of principal or interest for a minimum of two years. If the full standby extends beyond two years, it further strengthens the equity position.","example":"A buyer needs a $100,000 equity injection for a $1,000,000 acquisition. If the buyer injects $50,000 cash and the seller provides a $50,000 note on full standby for 5 years (no P&I payments), that $50,000 note can count towards the equity.","what_lenders_check":"Lenders verify that the standby agreement explicitly states no principal or interest payments for the required period and that the seller understands and agrees to these terms. Proper documentation is crucial for SBA compliance.","required_facts":["Seller note standby","Standby duration","No P&I payments","Equity injection rules"],"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":"If a seller takes a fully subordinated note, can they remain an employee or consultant after acquisition?","url":"https://dealroom.so/sba-7a/questions/if-a-seller-takes-a-fully-subordinated-note-can-they-remain-an-employee-or-consultant-afte"},{"question":"For a $900,000 business acquisition, what percentage of the total required equity injection can come from a fully subordinated seller note?","url":"https://dealroom.so/sba-7a/questions/for-a-900-000-business-acquisition-what-percentage-of-the-total-required-equity-injection-"},{"question":"Can a seller who takes a fully subordinated note also remain an employee or consultant of the business after the acquisition?","url":"https://dealroom.so/sba-7a/questions/can-a-seller-who-takes-a-fully-subordinated-note-also-remain-an-employee-or-consultant-of-"},{"question":"How does an earn-out provision affect an SBA 7(a) loan for a business acquisition?","url":"https://dealroom.so/sba-7a/questions/how-does-an-earn-out-provision-affect-an-sba-7-a-loan-for-a-business-acquisition"},{"question":"What is the minimum term duration a seller note must be on full standby for an SBA loan?","url":"https://dealroom.so/sba-7a/questions/what-is-the-minimum-term-duration-a-seller-note-must-be-on-full-standby-for-an-sba-loan"},{"question":"Can interest be accrued and paid on a seller note while it is on full standby?","url":"https://dealroom.so/sba-7a/questions/can-interest-be-accrued-and-paid-on-a-seller-note-while-it-is-on-full-standby"}],"related_terms":[{"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 note on standby","url":"https://dealroom.so/glossary/seller-note-on-standby"},{"term":"Partial Standby Seller Note","url":"https://dealroom.so/glossary/partial-standby-seller-note"},{"term":"Standby Note","url":"https://dealroom.so/glossary/standby-note"},{"term":"Standby Period","url":"https://dealroom.so/glossary/standby-period"}],"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-7a/questions/can-a-seller-note-with-a-5-year-full-standby-period-be-considered-part-of-the-equity-injec","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."]}