{"ok":true,"canonical_url":"https://dealroom.so/for-lenders/questions/what-happens-if-a-seller-note-on-full-standby-is-repaid-early-without-the-lender-s-knowled","api_url":"https://dealroom.so/api/public/questions/what-happens-if-a-seller-note-on-full-standby-is-repaid-early-without-the-lender-s-knowled","question":"What happens if a seller note on full standby is repaid early without the lender's knowledge or approval?","topic":"Standby Agreements","audience":"lender","bot_mode":"lender","short_answer":"If a full standby seller note is repaid early without lender knowledge, it constitutes a material adverse change and can result in the SBA denying or repairing its guaranty on the 7(a) loan.","rule":"A full standby seller note is a critical component of the buyer's equity injection, demonstrating additional capital and reducing the risk of the SBA loan. Early repayment without lender consent violates the standby agreement and SBA policy, effectively removing a portion of the borrower's effective equity and significantly increasing the loan's risk.","example":"A $50,000 seller note is on full standby for a $500,000 SBA loan. Six months after closing, the buyer secretly repays the seller. Upon discovery during a loan review, the SBA could deem this a material breach, repairing or denying the guaranty.","what_lenders_check":"Lenders are extremely concerned about unauthorized repayment of standby debt. They must clearly communicate the standby terms to the borrower and seller, and monitor for any signs of early repayment, as this directly jeopardizes the SBA's guaranty.","required_facts":["Full standby seller note","Early repayment","Without lender approval","Material adverse change","Guaranty repair/denial"],"source_families":["SOP 50 10 - Lender and Development Company Loan Programs","13 CFR Part 120 - Business Loans","Standard 7(a) Authorization File Library"],"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":"Standard 7(a) Authorization File Library","url":"https://www.sba.gov/document/support-standard-7a-authorization-file-library"}],"related_questions":[{"question":"What specific documentation does a lender need to confirm full standby status for a seller note in an acquisition?","url":"https://dealroom.so/for-lenders/questions/what-specific-documentation-does-a-lender-need-to-confirm-full-standby-status-for-a-seller"},{"question":"How does a lender verify the full standby status of a non-SBA debt to ensure eligibility for a 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/how-does-a-lender-verify-the-full-standby-status-of-a-non-sba-debt-to-ensure-eligibility-f"},{"question":"What specific conditions allow a seller note with deferred principal payments but immediate interest to qualify as full standby?","url":"https://dealroom.so/for-lenders/questions/what-specific-conditions-allow-a-seller-note-with-deferred-principal-payments-but-immediat"},{"question":"When is a lender required to obtain a subordination agreement for existing business debt?","url":"https://dealroom.so/for-lenders/questions/when-is-a-lender-required-to-obtain-a-subordination-agreement-for-existing-business-debt"},{"question":"How does a lender verify a seller note's full standby status for 7(a) equity injection compliance?","url":"https://dealroom.so/for-lenders/questions/how-does-a-lender-verify-a-seller-note-s-full-standby-status-for-7-a-equity-injection-comp"},{"question":"What are the key requirements for a seller note to qualify as \"full standby\" for equity injection purposes in a 7(a) acquisition?","url":"https://dealroom.so/for-lenders/questions/what-are-the-key-requirements-for-a-seller-note-to-qualify-as-full-standby-for-equity-inje"}],"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":"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/for-lenders/questions/what-happens-if-a-seller-note-on-full-standby-is-repaid-early-without-the-lender-s-knowled","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."]}