{"ok":true,"canonical_url":"https://dealroom.so/sba-7a/questions/what-happens-if-the-seller-s-note-is-only-partially-on-standby-with-some-payments-allowed","api_url":"https://dealroom.so/api/public/questions/what-happens-if-the-seller-s-note-is-only-partially-on-standby-with-some-payments-allowed","question":"What happens if the seller's note is only partially on standby, with some payments allowed?","topic":"Seller notes & standby","audience":"borrower","bot_mode":"buyer","short_answer":"If a seller's note is only partially on standby, the portion not on full standby is treated as business debt and must be factored into the business's debt service capacity.","rule":"For a seller note to count towards the buyer's equity injection, it must be on full standby, meaning no principal or interest payments are made during the SBA loan term. Any portion allowing payments is considered an additional liability that reduces the business's ability to repay the SBA loan.","example":"If you buy a $1,000,000 business with a $100,000 cash injection and a $100,000 seller note. If $50,000 of that seller note is on full standby (counting towards equity) but the other $50,000 allows payments, then that $50,000 payment obligation will be added to the business's debt burden, requiring sufficient cash flow to cover it in addition to the SBA loan.","what_lenders_check":"Lenders need clear standby agreements. Any payments on a seller note, even if only partial, are scrutinized to ensure the business's cash flow can comfortably support both the SBA loan and the seller's payments.","required_facts":["Partial standby","Seller note","Debt service","Cash flow impact","Equity injection"],"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":"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 on standby","url":"https://dealroom.so/glossary/seller-note-on-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":"Interest-Only Payments","url":"https://dealroom.so/glossary/interest-only-payments"},{"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":"2026-06-14","sba_rule_sources_checked_through":"2026-06-14"},"citation":{"label":"DealRoom.so SBA 7(a) Q&A","url":"https://dealroom.so/sba-7a/questions/what-happens-if-the-seller-s-note-is-only-partially-on-standby-with-some-payments-allowed","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."]}