{"ok":true,"canonical_url":"https://dealroom.so/sba-loans/basics/what-is-a-standby-seller-note-in-the-context-of-an-sba-7-a-loan-for-a-business-acquisition","api_url":"https://dealroom.so/api/public/questions/what-is-a-standby-seller-note-in-the-context-of-an-sba-7-a-loan-for-a-business-acquisition","question":"What is a 'standby seller note' in the context of an SBA 7(a) loan for a business acquisition?","topic":"Seller Notes & Equity","audience":"new","bot_mode":"buyer","short_answer":"A standby seller note is when the seller of a business finances a portion of the purchase price, but agrees to not receive any payments until the SBA loan is fully repaid.","rule":"For a seller note to count towards the buyer's equity injection, it must be on 'full standby,' meaning no payments of principal or interest can be made to the seller until the SBA 7(a) loan is paid in full. This strengthens the buyer's equity position and reduces the business's immediate debt service.","example":"A business is purchased for $1,000,000. The buyer injects $100,000 cash, an SBA loan covers $700,000, and the seller provides a $200,000 note. If this note is on full standby, the seller receives no payments until the $700,000 SBA loan is repaid.","what_lenders_check":"Lenders require a formal, written standby agreement signed by the seller. They ensure the terms strictly prohibit any payments (principal or interest) to the seller during the SBA loan's term, verifying it acts as true equity for underwriting purposes.","required_facts":["Seller finances part","No payments to seller","Until SBA loan repaid","Counts as equity","Strengthens capital","Formal agreement"],"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":[],"related_terms":[{"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":"SBA 7(a) loan","url":"https://dealroom.so/glossary/sba-7-a-loan"},{"term":"7(a) loan","url":"https://dealroom.so/glossary/7a-loan"},{"term":"Seller note on standby","url":"https://dealroom.so/glossary/seller-note-on-standby"},{"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/sba-loans/basics/what-is-a-standby-seller-note-in-the-context-of-an-sba-7-a-loan-for-a-business-acquisition","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."]}