For SBA lenders
Short answer
No, a seller note on full standby for an SBA 7(a) loan cannot be secured by any business assets; it must be completely unsecured and fully subordinated to the SBA loan.
To qualify as equity injection, a seller note on full standby must be fully subordinated and unsecured. If the seller retains any lien or security interest in the business assets, it would be considered a secured debt and not true equity, thus making it ineligible for counting towards the equity injection.
A seller agrees to a $100,000 full standby note as part of an acquisition. The lender ensures the standby agreement explicitly states the note is unsecured and that the seller will not take any lien on the business's inventory or equipment.
Lenders must scrutinize standby agreements and closing documents to ensure no hidden security interests are granted to the seller. Any secured standby note would lead to a guaranty repair or denial.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
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.
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