For SBA lenders
Short answer
Seller financing can reduce the borrower's required cash equity if it is on full standby; otherwise, it is treated as a liability and does not count towards the minimum equity injection.
For seller financing to count towards the minimum 10% equity injection requirement, it must be on full standby for the life of the SBA loan, unsecured, and not require payments of principal or interest. If it's on partial standby or requires payments, it's considered debt and does not contribute to the equity injection.
A $1,000,000 acquisition requires $100,000 (10%) equity. The borrower has $50,000 cash. If the seller provides a $50,000 note on full standby, the total $100,000 equity requirement is met. If the seller note is on partial standby, only the $50,000 cash counts, and the borrower needs another $50,000 cash equity.
Insider move
Lenders must meticulously review seller note terms and standby agreements to confirm they meet SBA requirements. Any non-compliance means the seller note cannot be considered equity, potentially making the borrower ineligible.
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 change-of-ownership underwriting
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