{"ok":true,"canonical_url":"https://dealroom.so/sba-7a/questions/for-a-partner-buyout-of-400-000-can-the-departing-partner-provide-a-seller-note-that-count","api_url":"https://dealroom.so/api/public/questions/for-a-partner-buyout-of-400-000-can-the-departing-partner-provide-a-seller-note-that-count","question":"For a partner buyout of $400,000, can the departing partner provide a seller note that counts as equity?","topic":"Partner buyouts","audience":"borrower","bot_mode":"buyer","short_answer":"Yes, in a partner buyout, a seller note provided by the departing partner can count towards the equity injection, but it must be on full standby and fully subordinated to the SBA loan.","rule":"Similar to other business acquisitions, a seller note from a departing partner can serve as equity injection if it adheres to the full standby requirements. This means no principal or interest payments are made on the note for the life of the SBA loan (or a minimum of two years if shorter), and the note is fully subordinated to the SBA loan, protecting the lender's position.","example":"If you are buying out a partner for $400,000 and the total project cost is $440,000, the required 10% equity is $44,000. Your departing partner could provide a $44,000 seller note on full standby, counting towards this equity, with the rest financed by the SBA loan.","what_lenders_check":"Lenders ensure the standby agreement is robust and unambiguous, preventing the departing partner from seeking repayment prematurely. They also verify that the buyout is an arm's length transaction, even between former partners.","required_facts":["Partner buyout","Seller note","Equity injection","Full standby","Subordination"],"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 I'm buying out a partner, does the remaining partner also need to personally guarantee the SBA loan for $500,000?","url":"https://dealroom.so/sba-7a/questions/if-i-m-buying-out-a-partner-does-the-remaining-partner-also-need-to-personally-guarantee-t"},{"question":"If I am buying out a partner, does the SBA require the business to pass a cash flow test post-acquisition?","url":"https://dealroom.so/sba-7a/questions/if-i-am-buying-out-a-partner-does-the-sba-require-the-business-to-pass-a-cash-flow-test-po"},{"question":"If I am buying out a partner, how does the SBA ensure the purchase price is fair and justifiable?","url":"https://dealroom.so/sba-7a/questions/if-i-am-buying-out-a-partner-how-does-the-sba-ensure-the-purchase-price-is-fair-and-justif"},{"question":"Can an SBA 7(a) loan be used to purchase a business if the seller will retain a minority ownership stake?","url":"https://dealroom.so/sba-7a/questions/can-an-sba-7-a-loan-be-used-to-purchase-a-business-if-the-seller-will-retain-a-minority-ow"},{"question":"What are the requirements for the seller in an SBA 7(a) business acquisition loan?","url":"https://dealroom.so/sba-7a/questions/what-are-the-requirements-for-the-seller-in-an-sba-7-a-business-acquisition-loan"},{"question":"Can an SBA 7(a) loan be used to fund a partner buyout with an earn-out provision?","url":"https://dealroom.so/sba-7a/questions/can-an-sba-7-a-loan-be-used-to-fund-a-partner-buyout-with-an-earn-out-provision"}],"related_terms":[{"term":"Buyout of a Partner","url":"https://dealroom.so/glossary/buyout-of-a-partner"},{"term":"Partner buyout","url":"https://dealroom.so/glossary/partner-buyout"},{"term":"Seller note","url":"https://dealroom.so/glossary/seller-note"},{"term":"Acceleration of the Note","url":"https://dealroom.so/glossary/acceleration-of-the-note"},{"term":"Holder of the Note","url":"https://dealroom.so/glossary/holder-of-the-note"},{"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/for-a-partner-buyout-of-400-000-can-the-departing-partner-provide-a-seller-note-that-count","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."]}