{"ok":true,"canonical_url":"https://dealroom.so/sba-7a/questions/how-is-a-seller-note-structured-to-be-on-full-standby-for-a-buyout","api_url":"https://dealroom.so/api/public/questions/how-is-a-seller-note-structured-to-be-on-full-standby-for-a-buyout","question":"How is a seller note structured to be on 'full standby' for a buyout?","topic":"Partner & owner buyout","audience":"borrower","bot_mode":"buyer","short_answer":"A seller note on 'full standby' must explicitly state that no principal or interest payments can be made until the SBA 7(a) loan is paid in full.","rule":"To be considered full standby, the seller note must be completely subordinate to the SBA loan. The standby agreement, signed by the seller, must legally prohibit any payments of principal or interest on the seller note for the entire term of the SBA loan, or until the SBA loan is repaid.","example":"A $100,000 seller note would include a clause stating: 'No payments of principal or interest shall be made on this Note until the SBA 7(a) loan (Loan #XXXXXX) is paid in full.' This agreement would be formally executed and recorded.","what_lenders_check":"Lenders require a formal, legally enforceable standby agreement that is recorded if applicable. They ensure there are no exceptions or loopholes that would allow payments on the seller note before the SBA loan is satisfied, safeguarding the SBA's position.","required_facts":["No principal payments","No interest payments","Subordinate to SBA","Formal agreement needed"],"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/document/sop-50-10-lender-development-company-loan-programs"},{"title":"13 CFR Part 120 — Business Loans","url":"https://www.ecfr.gov/current/title-13/chapter-I/part-120"}],"related_questions":[{"question":"Can I buy out my business partner with an SBA 7(a) loan?","url":"https://dealroom.so/sba-7a/questions/can-i-buy-out-my-business-partner-with-an-sba-7-a-loan"},{"question":"Can a partner buyout be done with zero money down under the SBA?","url":"https://dealroom.so/sba-7a/questions/can-a-partner-buyout-be-done-with-zero-money-down-under-the-sba"},{"question":"What is the 24-month ownership rule for a $0-down SBA partner buyout?","url":"https://dealroom.so/sba-7a/questions/what-is-the-24-month-ownership-rule-for-a-0-down-sba-partner-buyout"},{"question":"Is a partner buyout a complete or partial change of ownership for the SBA?","url":"https://dealroom.so/sba-7a/questions/is-a-partner-buyout-a-complete-or-partial-change-of-ownership-for-the-sba"},{"question":"Does the remaining owner have to personally guarantee the SBA loan after a buyout?","url":"https://dealroom.so/sba-7a/questions/does-the-remaining-owner-have-to-personally-guarantee-the-sba-loan-after-a-buyout"},{"question":"Can the company itself redeem the departing partner's shares with an SBA loan?","url":"https://dealroom.so/sba-7a/questions/can-the-company-itself-redeem-the-departing-partner-s-shares-with-an-sba-loan"}],"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":"Buyout of a Partner","url":"https://dealroom.so/glossary/buyout-of-a-partner"},{"term":"Partner buyout","url":"https://dealroom.so/glossary/partner-buyout"}],"related_tools":[{"name":"Partner Buyout toolkit","url":"https://dealroom.so/sba-7a/partner-buyout"},{"name":"Find an active SBA 7(a) lender","url":"https://dealroom.so/lenders"}],"data_freshness":{"last_reviewed":"2026-06-15","sba_rule_sources_checked_through":"2026-06-15"},"citation":{"label":"DealRoom.so SBA 7(a) Q&A","url":"https://dealroom.so/sba-7a/questions/how-is-a-seller-note-structured-to-be-on-full-standby-for-a-buyout","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."]}