For SBA lenders
Short answer
A lender must obtain a signed full standby agreement from the seller, explicitly stating no principal or interest payments are due for the life of the SBA loan (or a minimum of two years) and that the note is fully subordinated to the SBA loan.
SOP 50 10 requires specific documentation for seller notes on full standby. The agreement must clearly articulate the terms of no payments, subordination, and duration. This documentation ensures the seller's funds are genuinely at risk and contribute to the buyer's equity, as opposed to being a hidden form of debt.
The lender includes a separate, fully executed Subordination and Standby Agreement in the closing documents, signed by the seller. This agreement clearly outlines the non-payment period and the junior lien position of the seller's note.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 - Lender and Development Company Loan Programs
Standard 7(a) Authorization File Library
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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