{"ok":true,"canonical_url":"https://dealroom.so/sba-7a/questions/can-the-seller-s-post-closing-consulting-agreement-influence-the-standby-status-of-their-s","api_url":"https://dealroom.so/api/public/questions/can-the-seller-s-post-closing-consulting-agreement-influence-the-standby-status-of-their-s","question":"Can the seller's post-closing consulting agreement influence the standby status of their seller note?","topic":"Seller notes & standby","audience":"borrower","bot_mode":"buyer","short_answer":"Yes, the terms of a seller's post-closing consulting agreement can influence the standby status of their seller note, especially if compensation is excessive.","rule":"If a seller provides a note on full standby, any post-closing compensation (e.g., consulting fees, salary) must be for reasonable services actually rendered and at market rates. Excessive compensation could be viewed as a disguised repayment of the standby note, jeopardizing its equity status.","example":"If a seller provides a $200,000 standby note and is paid $150,000 annually for 'consulting' with minimal duties, the lender might consider this excessive, reclassify a portion as disguised note repayment, and require additional buyer equity.","what_lenders_check":"Lenders ensure that seller post-closing arrangements do not circumvent the standby agreement. They scrutinize consulting or employment agreements to confirm compensation is reasonable, for actual services, and does not draw cash out of the business in a way that impacts loan repayment.","required_facts":["Seller consulting agreement","Compensation reasonableness","Actual services rendered","Standby note status","Cash flow impact"],"source_families":["SOP 50 10 - Lender and Development Company Loan Programs","13 CFR Part 120 - Business Loans","7(a) Loan Program Terms, Conditions, and Eligibility"],"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"},{"title":"7(a) Loan Program Terms, Conditions, and Eligibility","url":"https://www.sba.gov/partners/lenders/7a-loan-program/terms-conditions-eligibility"}],"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":"Post-Closing Consulting Agreement","url":"https://dealroom.so/glossary/post-closing-consulting-agreement"},{"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 Consulting Agreement","url":"https://dealroom.so/glossary/seller-consulting-agreement"},{"term":"Seller standby agreement","url":"https://dealroom.so/glossary/seller-standby-agreement"},{"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":"2026-06-13","sba_rule_sources_checked_through":"2026-06-13"},"citation":{"label":"DealRoom.so SBA 7(a) Q&A","url":"https://dealroom.so/sba-7a/questions/can-the-seller-s-post-closing-consulting-agreement-influence-the-standby-status-of-their-s","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."]}