{"ok":true,"canonical_url":"https://dealroom.so/sba-7a/questions/what-percentage-of-the-required-equity-injection-can-come-from-a-seller-standby-note-for-a","api_url":"https://dealroom.so/api/public/questions/what-percentage-of-the-required-equity-injection-can-come-from-a-seller-standby-note-for-a","question":"What percentage of the required equity injection can come from a seller standby note for a business acquisition?","topic":"Seller notes & standby","audience":"borrower","bot_mode":"buyer","short_answer":"A seller note on full standby can contribute towards the borrower's equity injection, but generally, at least half of the total required equity must be from the buyer's own cash or eligible assets. This means the seller note typically cannot exceed 50% of the required injection.","rule":"SBA rules require a minimum 10% equity injection for most business acquisitions. If a seller note is used to supplement the buyer's cash injection, it must be on 'full standby' for the life of the SBA loan. While a seller note can be part of the total injection, the SBA mandates that the buyer provide at least half of the total required equity from their own resources, ensuring a significant personal stake.","example":"For a $1,000,000 business acquisition requiring a 10% ($100,000) equity injection, the buyer must contribute at least $50,000 in cash. The remaining $50,000 could potentially come from a fully subordinated seller note.","what_lenders_check":"Lenders will meticulously review the standby agreement to ensure it meets SBA requirements, including no payments of principal or interest for the life of the SBA loan, and verify the buyer's direct cash contribution. They need to confirm the buyer has a meaningful equity stake.","required_facts":["Seller note standby","Buyer cash injection","Minimum 10% equity","Life of SBA loan","No payments"],"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 standby note","url":"https://dealroom.so/glossary/seller-standby-note"},{"term":"Standby seller note","url":"https://dealroom.so/glossary/standby-seller-note"},{"term":"Indemnification from the Seller","url":"https://dealroom.so/glossary/indemnification-from-the-seller"},{"term":"Acceleration of the Note","url":"https://dealroom.so/glossary/acceleration-of-the-note"},{"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":"2026-06-14","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-percentage-of-the-required-equity-injection-can-come-from-a-seller-standby-note-for-a","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."]}