{"ok":true,"canonical_url":"https://dealroom.so/for-lenders/questions/if-a-seller-note-on-full-standby-can-it-still-accrue-interest-during-the-sba-loan-term","api_url":"https://dealroom.so/api/public/questions/if-a-seller-note-on-full-standby-can-it-still-accrue-interest-during-the-sba-loan-term","question":"If a seller note on full standby, can it still accrue interest during the SBA loan term?","topic":"Standby agreements","audience":"lender","bot_mode":"lender","short_answer":"Yes, a seller note on full standby can accrue interest during the SBA loan term, but no payments of that interest (or principal) can be made to the seller until the SBA loan is repaid.","rule":"The SBA's full standby requirement prohibits any payments of principal or interest on the seller note. However, the note can legally accrue interest, which would then be added to the principal balance and become payable only after the SBA 7(a) loan is satisfied, or at the end of a specific standby period if approved.","example":"A $100,000 seller note on full standby carries a 6% annual interest rate. The lender ensures the standby agreement explicitly states that this interest will accrue but will not be paid until the 7(a) loan is paid in full.","what_lenders_check":"Lenders must verify that the standby agreement clearly delineates between interest accrual and payment. Any clause allowing payment of accrued interest during the standby period would violate SBA rules and disqualify it as equity.","required_facts":["Seller note","Full standby","Accrue interest","No payments"],"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":[{"question":"What documentation must a lender obtain to ensure a seller note is fully on standby and subordinated to the SBA 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/what-documentation-must-a-lender-obtain-to-ensure-a-seller-note-is-fully-on-standby-and-su"},{"question":"What specific financial covenants or conditions must be included in a seller note on full standby for a 7(a) acquisition loan?","url":"https://dealroom.so/for-lenders/questions/what-specific-financial-covenants-or-conditions-must-be-included-in-a-seller-note-on-full-"},{"question":"What specific language must a standby agreement for a seller note include to meet SBA 7(a) requirements for equity injection?","url":"https://dealroom.so/for-lenders/questions/what-specific-language-must-a-standby-agreement-for-a-seller-note-include-to-meet-sba-7-a-"},{"question":"What is the impact on an SBA 7(a) loan if a seller note on full standby is repaid prematurely without the lender's knowledge?","url":"https://dealroom.so/for-lenders/questions/what-is-the-impact-on-an-sba-7-a-loan-if-a-seller-note-on-full-standby-is-repaid-premature"},{"question":"What are the specific SBA requirements for a seller's note to be on full standby?","url":"https://dealroom.so/for-lenders/questions/what-are-the-specific-sba-requirements-for-a-seller-s-note-to-be-on-full-standby"},{"question":"What specific language must a non-SBA third-party standby agreement include to ensure eligibility?","url":"https://dealroom.so/for-lenders/questions/what-specific-language-must-a-non-sba-third-party-standby-agreement-include-to-ensure-elig"}],"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":"Accrue Interest","url":"https://dealroom.so/glossary/accrue-interest"},{"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":"2026-06-13","sba_rule_sources_checked_through":"2026-06-13"},"citation":{"label":"DealRoom.so SBA 7(a) Q&A","url":"https://dealroom.so/for-lenders/questions/if-a-seller-note-on-full-standby-can-it-still-accrue-interest-during-the-sba-loan-term","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."]}