For SBA lenders
Short answer
Partial standby means some payments are allowed on the seller's note, but they must be structured to not impair the borrower's ability to repay the SBA loan, and the note must still be subordinated.
With partial standby, the SBA permits interest-only payments or deferred principal payments on the subordinated debt, provided the cash flow can support both obligations. The lender must demonstrate the borrower's ability to service both the SBA loan and the partially standby debt, and the seller's note remains subordinated.
A $100,000 seller note is on partial standby, allowing interest-only payments of $500 per month. The lender's cash flow analysis must show the business can comfortably make both the SBA loan payments and these $500 seller note payments.
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.
More on standby agreements
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