For SBA lenders
Short answer
Yes, a seller note can be on partial standby, allowing for deferred principal payments but permitting interest payments to the seller during the SBA 7(a) loan's term.
Partial standby allows for flexibility. The note is subordinate to the SBA loan regarding principal payments (typically for a specified period, like 24 months), but interest payments to the seller are generally permitted. This structure can help bridge a financing gap while still providing the seller with some income.
A $1,000,000 business acquisition includes a $100,000 seller note. The lender places this note on partial standby, requiring no principal payments for 24 months, but allowing interest payments at 5% per annum to the seller during this period, after which regular principal and interest payments would resume.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
7(a) Loan Program — Terms, Conditions, and Eligibility
U.S. Small Business Administration · Official SBA source
SOP 50 10 - Lender and Development Company Loan Programs
Last checked 2026-06-13. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-13 · SBA sources checked through 2026-06-13. DealRoom analysis of public SBA 7(a) lending records (FY2020–present). Grounded in the current SBA rulebook; verify against the official sources above before relying on it for a live deal. Not legal, tax, or financial advice, and not an approval decision.
More on standby agreements
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