{"ok":true,"canonical_url":"https://dealroom.so/for-lenders/questions/can-an-investor-s-loan-to-the-borrower-be-placed-on-full-standby-to-count-towards-the-equi","api_url":"https://dealroom.so/api/public/questions/can-an-investor-s-loan-to-the-borrower-be-placed-on-full-standby-to-count-towards-the-equi","question":"Can an investor's loan to the borrower be placed on full standby to count towards the equity injection for a 7(a) loan?","topic":"Standby agreements","audience":"lender","bot_mode":"lender","short_answer":"Yes, an investor's loan can be placed on full standby to count as part of the equity injection for a 7(a) loan, provided it meets all the SBA's specific full standby requirements.","rule":"The SBA permits third-party debt, including investor loans, to qualify as an equity injection if it is on 'full standby.' This means the debt cannot be repaid (principal or interest) until the SBA 7(a) loan is fully satisfied, and it must be unconditionally subordinated to the SBA loan. A formal standby agreement, typically in the form of a Promissory Note and Standby Agreement, is required.","example":"A borrower secures a $100,000 loan from a non-owner investor for their new business. To meet the 10% equity injection for a $1,000,000 7(a) loan, the lender drafts a full standby agreement for the investor loan, preventing any payments until the SBA loan is repaid, making it eligible as equity.","what_lenders_check":"Lenders must ensure the standby agreement is comprehensive, legally enforceable, and explicitly prohibits any payments (principal or interest) during the SBA loan's term. Thorough documentation and proper execution of the standby agreement are crucial to avoid a guaranty repair.","required_facts":["Investor type","Loan terms","Full standby requirement","Subordination","Equity injection percentage"],"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 Financing on Full Standby","url":"https://dealroom.so/glossary/seller-financing-on-full-standby"},{"term":"Full Standby Status","url":"https://dealroom.so/glossary/full-standby-status"},{"term":"Full Standby Agreement","url":"https://dealroom.so/glossary/full-standby-agreement"},{"term":"Seller note on standby","url":"https://dealroom.so/glossary/seller-note-on-standby"},{"term":"Call on the guaranty","url":"https://dealroom.so/glossary/call-on-the-guaranty"},{"term":"Investor","url":"https://dealroom.so/glossary/investor"}],"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-an-investor-s-loan-to-the-borrower-be-placed-on-full-standby-to-count-towards-the-equi","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."]}