{"ok":true,"canonical_url":"https://dealroom.so/sba-7a/questions/can-a-seller-who-takes-a-fully-subordinated-note-also-remain-an-employee-or-consultant-of-","api_url":"https://dealroom.so/api/public/questions/can-a-seller-who-takes-a-fully-subordinated-note-also-remain-an-employee-or-consultant-of-","question":"Can a seller who takes a fully subordinated note also remain an employee or consultant of the business after the acquisition?","topic":"Seller notes & standby","audience":"borrower","bot_mode":"buyer","short_answer":"Yes, a seller providing a fully subordinated note can remain an employee or consultant for the business, provided their compensation is reasonable.","rule":"The SBA permits sellers who finance a portion of the acquisition through a fully subordinated note to remain involved in the business post-closing. However, any compensation paid to the seller for their services (as an employee or consultant) must be for actual, necessary services rendered, and must be at a reasonable, market-rate level. The compensation should not be a disguised form of early repayment on the seller note, which would violate the subordination agreement.","example":"A $1 million business acquisition includes a $100,000 fully subordinated seller note. The seller is retained as a part-time consultant for six months at $4,000 per month. This compensation is acceptable if it reflects fair value for the consulting services.","what_lenders_check":"Lenders closely examine the terms of any post-closing employment or consulting agreements with the seller to ensure compensation is reasonable and not a circumvention of the seller note's standby requirements.","required_facts":["Seller note standby","Seller as employee","Consulting agreement","Reasonable compensation","No disguised payments"],"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":"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"},{"question":"Does a seller's post-closing consulting agreement influence their standby note status with the SBA?","url":"https://dealroom.so/sba-7a/questions/does-a-seller-s-post-closing-consulting-agreement-influence-their-standby-note-status-with"}],"related_terms":[{"term":"Fully subordinated note","url":"https://dealroom.so/glossary/fully-subordinated-note"},{"term":"Subordinated Seller Note","url":"https://dealroom.so/glossary/subordinated-seller-note"},{"term":"Fully subordinated","url":"https://dealroom.so/glossary/fully-subordinated"},{"term":"Seller note","url":"https://dealroom.so/glossary/seller-note"},{"term":"Fully Subordinated Debt","url":"https://dealroom.so/glossary/fully-subordinated-debt"},{"term":"Seller standby note","url":"https://dealroom.so/glossary/seller-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":"2026-06-14","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-who-takes-a-fully-subordinated-note-also-remain-an-employee-or-consultant-of-","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."]}