{"ok":true,"canonical_url":"https://dealroom.so/sba-7a/questions/how-is-a-seller-note-required-to-be-structured-to-count-towards-the-10-equity-injection","api_url":"https://dealroom.so/api/public/questions/how-is-a-seller-note-required-to-be-structured-to-count-towards-the-10-equity-injection","question":"How is a seller note required to be structured to count towards the 10% equity injection?","topic":"Seller notes & standby","audience":"borrower","bot_mode":"buyer","short_answer":"A seller note must be on \"full standby\" for the entire term of the SBA 7(a) loan, meaning no payments of principal or interest are permitted until the SBA loan is fully repaid.","rule":"For a seller note to count towards the borrower's equity injection, it must be fully subordinated to the SBA loan. This ensures that the seller's investment is truly at risk and enhances the equity position of the acquired business, providing a stronger financial foundation.","example":"For a $1,000,000 business acquisition requiring $100,000 equity, a $50,000 seller note could contribute if its terms explicitly state no payments of principal or interest for the 10-year term of the SBA loan.","what_lenders_check":"Lenders meticulously review the subordination agreement for the seller note. They ensure there are no loopholes, acceleration clauses, or conditions that would allow the seller to receive payments before the SBA loan is satisfied.","required_facts":["Seller note standby","Full subordination","No payments","Loan term","Equity injection"],"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","url":"https://dealroom.so/glossary/seller-note"},{"term":"Equity injection","url":"https://dealroom.so/glossary/equity-injection"},{"term":"Seller standby note","url":"https://dealroom.so/glossary/seller-standby-note"},{"term":"Subordinated Seller Note","url":"https://dealroom.so/glossary/subordinated-seller-note"},{"term":"Standby seller note","url":"https://dealroom.so/glossary/standby-seller-note"},{"term":"Minimum Equity Injection","url":"https://dealroom.so/glossary/minimum-equity-injection"}],"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/how-is-a-seller-note-required-to-be-structured-to-count-towards-the-10-equity-injection","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."]}