For SBA lenders
Short answer
A seller note qualifies as full standby if it has no payments of principal or interest for the life of the SBA loan (or until the SBA loan is fully repaid), and it is fully subordinated to the SBA loan.
For a seller note to count towards the equity injection for an acquisition, the SBA requires it to be on 'full standby.' This means that no payments of principal or interest can be made to the seller during the term of the SBA loan, and the seller's claim on assets must be fully subordinate to the SBA loan. Any deviation from this (e.g., interest-only payments) would disqualify it as cash equivalent equity.
In a $1,000,000 acquisition, the buyer injects $100,000 cash, and the seller takes a $100,000 note. To count this $100,000 towards the 10% equity, the note must explicitly state no principal or interest payments are due until the SBA loan is fully satisfied, and it must be subordinated to the SBA loan.
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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