{"ok":true,"canonical_url":"https://dealroom.so/sba-7a/questions/if-a-seller-takes-a-fully-subordinated-note-can-they-remain-an-employee-or-consultant-afte","api_url":"https://dealroom.so/api/public/questions/if-a-seller-takes-a-fully-subordinated-note-can-they-remain-an-employee-or-consultant-afte","question":"If a seller takes a fully subordinated note, can they remain an employee or consultant after acquisition?","topic":"Seller notes & standby","audience":"borrower","bot_mode":"buyer","short_answer":"Yes, a seller who provides a fully subordinated note can remain an employee or consultant, but the terms of their compensation must be reasonable.","rule":"The SBA allows a seller to remain involved in the business post-acquisition, even if they have a fully subordinated seller note. However, any compensation for their employment or consulting services must be reasonable and not excessive, ensuring it doesn't negatively impact the business's ability to repay the SBA loan.","example":"A buyer acquires a $1 million business with a $100,000 seller note on full standby. The seller stays on as a consultant for one year, earning $5,000 per month, which is deemed fair market value for their services.","what_lenders_check":"Lenders verify that the seller's compensation is for bona fide services and is consistent with industry standards, preventing disguised loan repayments that could undermine the standby agreement.","required_facts":["Seller note standby","Seller involvement","Compensation reasonableness","Repayment capacity"],"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":"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"},{"question":"Does a seller's post-closing consulting agreement influence their standby note status with the SBA?","url":"https://dealroom.so/sba-7a/questions/does-a-seller-s-post-closing-consulting-agreement-influence-their-standby-note-status-with"}],"related_terms":[{"term":"Fully subordinated note","url":"https://dealroom.so/glossary/fully-subordinated-note"},{"term":"Subordinated Seller Note","url":"https://dealroom.so/glossary/subordinated-seller-note"},{"term":"Fully subordinated","url":"https://dealroom.so/glossary/fully-subordinated"},{"term":"Seller note","url":"https://dealroom.so/glossary/seller-note"},{"term":"Fully Subordinated Debt","url":"https://dealroom.so/glossary/fully-subordinated-debt"},{"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/if-a-seller-takes-a-fully-subordinated-note-can-they-remain-an-employee-or-consultant-afte","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."]}