{"ok":true,"canonical_url":"https://dealroom.so/sba-7a/questions/what-if-the-seller-of-the-business-insists-on-receiving-a-portion-of-their-note-repayment-","api_url":"https://dealroom.so/api/public/questions/what-if-the-seller-of-the-business-insists-on-receiving-a-portion-of-their-note-repayment-","question":"What if the seller of the business insists on receiving a portion of their note repayment within the first year?","topic":"Seller notes & standby","audience":"borrower","bot_mode":"buyer","short_answer":"If the seller note is intended to count as equity, it must be on full standby for the entire life of the SBA loan. Any payments within the first year would disqualify it from being equity.","rule":"To qualify as equity injection, a seller note must be on 'full standby,' meaning no principal or interest payments can be made by the business to the seller during the term of the SBA loan. Any deviation from this, especially early payments, disqualifies it as equity.","example":"If the seller wants $50,000 of their $150,000 note repaid in the first year, only the remaining $100,000 (if structured on full standby) would be considered equity. This means you'd need to find another $50,000 in cash equity.","what_lenders_check":"Lenders scrutinize seller note terms to ensure they don't compromise the business's cash flow or the SBA loan's repayment priority. They will strictly enforce the full standby requirement for any portion counting as equity.","required_facts":["Full standby requirement","Seller note repayment terms","Equity injection impact","Business cash flow","SBA loan priority"],"source_families":["SOP 50 10 - Lender and Development Company Loan Programs","13 CFR Part 120 - Business Loans","7(a) Loan Program Terms, Conditions, and Eligibility"],"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":"7(a) Loan Program Terms, Conditions, and Eligibility","url":"https://www.sba.gov/partners/lenders/7a-loan-program/terms-conditions-eligibility"}],"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 note","url":"https://dealroom.so/glossary/seller-note"},{"term":"Seller-Financed Portion","url":"https://dealroom.so/glossary/seller-financed-portion"},{"term":"Acceleration of the Note","url":"https://dealroom.so/glossary/acceleration-of-the-note"},{"term":"Holder of the Note","url":"https://dealroom.so/glossary/holder-of-the-note"},{"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":"2026-06-13","sba_rule_sources_checked_through":"2026-06-13"},"citation":{"label":"DealRoom.so SBA 7(a) Q&A","url":"https://dealroom.so/sba-7a/questions/what-if-the-seller-of-the-business-insists-on-receiving-a-portion-of-their-note-repayment-","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."]}