{"ok":true,"canonical_url":"https://dealroom.so/sba-7a/questions/does-a-seller-note-always-have-to-be-on-full-standby-or-are-other-terms-allowed-for-sba-pu","api_url":"https://dealroom.so/api/public/questions/does-a-seller-note-always-have-to-be-on-full-standby-or-are-other-terms-allowed-for-sba-pu","question":"Does a seller note always have to be on \"full standby\" or are other terms allowed for SBA purposes?","topic":"Seller notes & standby","audience":"borrower","bot_mode":"buyer","short_answer":"For a seller note to count toward equity injection, it generally requires 'full standby' without principal or interest payments.","rule":"The SBA's default requirement for seller notes counting as equity is full standby, meaning no payments until the SBA loan is fully repaid. In rare, specific circumstances, the SBA may allow 'partial standby,' where only principal payments are deferred, or payments are allowed if certain debt service coverage ratios are met, but these are exceptions and require SBA approval.","example":"If a buyer's cash injection is below 10%, a seller note on partial standby (e.g., interest-only payments allowed) generally would not fulfill the equity injection requirement. A full standby note, deferring all payments, would be necessary.","what_lenders_check":"Lenders prefer full standby for clarity and to meet equity injection requirements. Any deviation from full standby needs strong justification and explicit SBA approval, which complicates underwriting and approval.","required_facts":["Full standby requirement","Equity injection criteria","Partial standby exceptions","SBA approval needed"],"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":"Seller note on standby","url":"https://dealroom.so/glossary/seller-note-on-standby"},{"term":"Seller Financing on Full Standby","url":"https://dealroom.so/glossary/seller-financing-on-full-standby"},{"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":"Standby Terms","url":"https://dealroom.so/glossary/standby-terms"},{"term":"Partial Standby Seller Note","url":"https://dealroom.so/glossary/partial-standby-seller-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/does-a-seller-note-always-have-to-be-on-full-standby-or-are-other-terms-allowed-for-sba-pu","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."]}