{"ok":true,"canonical_url":"https://dealroom.so/sba-7a/questions/how-does-the-sba-verify-the-terms-of-a-seller-note-including-its-standby-status-for-an-acq","api_url":"https://dealroom.so/api/public/questions/how-does-the-sba-verify-the-terms-of-a-seller-note-including-its-standby-status-for-an-acq","question":"How does the SBA verify the terms of a seller note, including its standby status, for an acquisition?","topic":"Seller Note Verification","audience":"borrower","bot_mode":"buyer","short_answer":"The SBA verifies seller note terms through a formal Subordination Agreement signed by the seller, borrower, and lender, explicitly outlining its standby status.","rule":"For a seller note to qualify as equity, it must be fully subordinate to the SBA loan. This is formalized through a Subordination Agreement, which details the note's terms, including no payments of principal or interest until the SBA loan is repaid, and explicitly states it is on full standby.","example":"For your $1,200,000 acquisition with a $120,000 seller note, the lender will draft a Subordination Agreement. The seller, you, and the lender will sign this agreement, confirming the note's full standby status and repayment terms.","what_lenders_check":"Lenders prioritize proper documentation of seller notes to ensure SBA compliance. The Subordination Agreement is critical to prevent future claims by the seller that could jeopardize the SBA loan's priority position.","required_facts":["Seller note terms","Standby status","Subordination agreement","Verification"],"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":[],"related_terms":[{"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":"Seller note on standby","url":"https://dealroom.so/glossary/seller-note-on-standby"},{"term":"Partial Standby Seller Note","url":"https://dealroom.so/glossary/partial-standby-seller-note"},{"term":"Standby Note","url":"https://dealroom.so/glossary/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":"2026-06-13","sba_rule_sources_checked_through":"2026-06-13"},"citation":{"label":"DealRoom.so SBA 7(a) Q&A","url":"https://dealroom.so/sba-7a/questions/how-does-the-sba-verify-the-terms-of-a-seller-note-including-its-standby-status-for-an-acq","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."]}