{"ok":true,"canonical_url":"https://dealroom.so/sba-7a/questions/can-the-seller-receive-any-form-of-compensation-from-the-acquired-business-during-the-stan","api_url":"https://dealroom.so/api/public/questions/can-the-seller-receive-any-form-of-compensation-from-the-acquired-business-during-the-stan","question":"Can the seller receive any form of compensation from the acquired business during the standby period of their seller note?","topic":"Seller notes & standby","audience":"borrower","bot_mode":"buyer","short_answer":"Generally, no, the seller cannot receive any form of compensation from the acquired business if they have a full standby seller note, unless it's for arm's-length employment at a market rate.","rule":"The intent of a full standby agreement is to subordinate the seller's financial interest to the SBA loan. Any compensation beyond legitimate, arm's-length employment (where the seller is a bona fide employee paid a market-rate salary) is typically disallowed, as it could be seen as an indirect payment on the standby note or an excessive drain on the business's cash flow.","example":"A seller provides a $100,000 full standby note. They cannot receive a 'consulting fee' of $2,000 per month. However, they could be hired as a part-time manager for a salary of $3,000 per month if it's a genuine position with market-rate pay and duties.","what_lenders_check":"Lenders scrutinize any post-acquisition arrangements with the seller, such as consulting agreements or salaries. They must ensure these arrangements are truly arm's-length, market-rate, and not a disguised way to circumvent the standby provisions, which could lead to a guaranty repair.","required_facts":["Full standby","No indirect payments","Arm's-length employment","Market-rate salary","Cash flow impact"],"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":"Indemnification from the Seller","url":"https://dealroom.so/glossary/indemnification-from-the-seller"},{"term":"Standby Period","url":"https://dealroom.so/glossary/standby-period"},{"term":"Seller standby note","url":"https://dealroom.so/glossary/seller-standby-note"},{"term":"Seller standby agreement","url":"https://dealroom.so/glossary/seller-standby-agreement"},{"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"}],"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-the-seller-receive-any-form-of-compensation-from-the-acquired-business-during-the-stan","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."]}